Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number:

000-50679

CORCEPT THERAPEUTICS INCORPORATED

(Exact Name of Corporation as Specified in Its Charter)

 

 

 

Delaware   77-0487658

(State or other jurisdiction of

incorporation or organization)

  (I.R.S. Employer Identification No.)

149 Commonwealth Drive

Menlo Park, CA 94025

(Address of principal executive offices, including zip code)

 

 

(650) 327-3270

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one.)

 

Large Accelerated Filer   ¨   Accelerated Filer   x
Non-accelerated filer   ¨   (Do not check if a smaller reporting company)   Smaller Reporting Company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   ¨     No   x

On August 2, 2012 there were 99,681,768 shares of common stock outstanding at a par value of $0.001 per share.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

     4   

ITEM 1.

 

FINANCIAL STATEMENTS

     4   
 

CONDENSED BALANCE SHEETS

     4   
 

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

     5   
 

CONDENSED STATEMENTS OF CASH FLOWS

     6   
 

NOTES TO CONDENSED FINANCIAL STATEMENTS

     7   

ITEM 2.

  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS      15   

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     22   

ITEM 4.

 

CONTROLS AND PROCEDURES

     23   

PART II. OTHER INFORMATION

     24   

ITEM 1.

 

LEGAL PROCEEDINGS

     24   

ITEM 1A.

 

RISK FACTORS

     24   

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     44   

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

     44   

ITEM 4.

 

MINE SAFETY DISCLOSURES

     44   

ITEM 5.

 

OTHER INFORMATION

     44   

ITEM 6.

 

EXHIBITS

     45   

SIGNATURES

     46   

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (Form 10-Q) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, or the Securities Act. All statements contained in this Form 10-Q other than statements of historical fact are forward-looking statements. When used in this report or elsewhere by management from time to time, the words “believe,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “may,” “will,” “should,” “seeks” and similar expressions are forward-looking statements. Such forward-looking statements are based on current expectations, but the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements made in this Quarterly Report on Form 10-Q may include, but are not limited to, statements about:

 

   

our ability to manufacture, market, commercialize and achieve market acceptance for Korlym™ (mifepristone) 300mg Tablets;

 

   

our ability to realize the benefits of Orphan Drug Designation of Korlym in the United States and the European Union (EU);

 

   

the progress and timing of our research, development and clinical programs and the timing of regulatory activities, including post-approval actions by the United States Food and Drug Administration (FDA) for mifepristone for the treatment of the psychotic features of psychotic depression;

 

   

our estimates of the dates by which we expect to report results of our clinical trials and the anticipated results of these trials;

 

   

the timing of the market introduction of future product candidates, including any other compound in our families of selective GR-II antagonists;

 

   

our ability to manufacture, market, commercialize and achieve market acceptance for our future product candidates, including mifepristone for the treatment of the psychotic features of psychotic depression and any other compound in our families of selective GR-II antagonists;

 

   

uncertainties associated with obtaining and enforcing patents;

 

   

our estimates for future performance, including revenue and profits; and

 

   

our estimates regarding our capital requirements and our needs for, and ability to obtain, additional financing.

Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors. For a more detailed discussion of such forward-looking statements and the potential risks and uncertainties that may impact upon their accuracy, see Part II, Item 1A, “Risk Factors” and the “Overview” and “Liquidity and Capital Resources” sections of Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Quarterly Report on Form 10-Q. These forward-looking statements reflect our view only as of the date of this report. Except as required by law, we undertake no obligations to update any forward-looking statements. Accordingly, you should also carefully consider the factors set forth in other reports or documents that we file from time to time with the Securities and Exchange Commission (SEC).

 

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PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

CORCEPT THERAPEUTICS INCORPORATED

CONDENSED BALANCE SHEETS

(In thousands)

 

     June 30,
2012
    December 31,
2011
 
     (Unaudited)     (See Note 1)  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 34,899      $ 39,635   

Trade receivables

     355        —     

Inventory

     2,437        —     

Prepaid expenses and other current assets

     608        140   
  

 

 

   

 

 

 

Total current assets

     38,299        39,775   

Property and equipment, net of accumulated depreciation

     59        26   

Other assets

     260        32   
  

 

 

   

 

 

 

Total assets

   $ 38,618      $ 39,833   
  

 

 

   

 

 

 

Liabilities and stockholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 4,235      $ 3,611   

Accrued clinical expenses

     640        644   

Accrued compensation

     294        238   

Other accrued liabilities

     621        533   

Deferred revenue

     26        —     
  

 

 

   

 

 

 

Total current liabilities

     5,816        5,026   

Commitments (Note 4)

    

Stockholders’ equity:

    

Preferred stock

     —          —     

Common stock

     89        84   

Additional paid-in capital

     259,901        243,281   

Accumulated deficit and comprehensive loss

     (227,188     (208,558
  

 

 

   

 

 

 

Total stockholders’ equity

     32,802        34,807   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 38,618      $ 39,833   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed financial statements.

 

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CORCEPT THERAPEUTICS INCORPORATED

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share data)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30
 
     2012     2011     2012     2011  

Product sales, net

   $ 875      $ —        $ 875      $ —     

Operating expenses:

        

Cost of sales

     48        —          48        —     

Research and development

     2,668        6,203        6,210        11,127   

Selling, general and administrative

     5,751        2,666        13,238        4,840   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     8,467        8,869        19,496        15,967   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (7,592     (8,869     (18,621     (15,967

Interest and other income, net

     —          (1     —          1   

Other expense

     (5     (12     (9     (17
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss and comprehensive loss

   $ (7,597   $ (8,882   $ (18,630   $ (15,983
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net loss per share

   $ (0.09   $ (0.11   $ (0.22   $ (0.19
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding used in computing basic and diluted net loss per share

     88,621        84,010        86,521        82,396   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed financial statements.

 

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CORCEPT THERAPEUTICS INCORPORATED

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

     Six Months Ended
June 30,
 
     2012     2011  

Operating activities

    

Net loss

   $ (18,630   $ (15,983

Adjustments to reconcile net loss to net cash used in operations:

    

Depreciation and amortization of property and equipment

     8        1   

Expense related to stock options

     3,271        1,449   

Changes in operating assets and liabilities:

    

Trade receivables

     (355     —     

Inventory

     (2,437     —     

Prepaid expenses and other current assets

     (468     (37

Other assets

     (228     72   

Accounts payable

     624        1,474   

Accrued clinical expenses

     (4     (16

Deferred revenue

     26        —     

Other liabilities

     144        (1,462
  

 

 

   

 

 

 

Net cash used in operating activities

     (18,049     (14,502
  

 

 

   

 

 

 

Investing activities

    

Purchases of property and equipment

     (41     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (41     —     
  

 

 

   

 

 

 

Financing activities

    

Proceeds from issuance of common stock and warrants, including collection of notes receivable, net of issuance costs

     13,354        42,154   
  

 

 

   

 

 

 

Net cash provided by financing activities

     13,354        42,154   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     (4,736     27,652   

Cash and cash equivalents, at beginning of period

     39,635        24,578   
  

 

 

   

 

 

 

Cash and cash equivalents, at end of period

   $ 34,899      $ 52,230   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed financial statements.

 

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CORCEPT THERAPEUTICS INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Description of Business and Basis of Presentation

Corcept Therapeutics Incorporated was incorporated in the state of Delaware on May 13, 1998, and our facilities are located in Menlo Park, California. Corcept is a pharmaceutical company engaged in the discovery, development and commercialization of drugs for the treatment of severe metabolic and psychiatric disorders. Since our inception in May 1998, we have been developing our lead product, Korlym™. Mifepristone, the active ingredient in Korlym, is a potent glucocorticoid receptor II (GR-II) antagonist, which means that it blocks the effects of cortisol throughout the body. On February 17, 2012, the United States Food and Drug Administration (FDA) approved Korlym (mifepristone) 300 mg Tablets in the United States as a once-daily oral medication for treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery. We released Korlym for sale on April 10, 2012. We also have a clinical program for the use of mifepristone, the active ingredient in Korlym, for the treatment of the psychotic features of psychotic depression. We are currently conducting a phase 3 study for this indication. In addition, we have discovered three series of novel selective glucocorticoid receptor II (GR-II) antagonists. Unless otherwise stated, all references in these financial statements to “we,” “us,” “our,” “Corcept,” the “Company,” “our company” and similar designations refer to Corcept Therapeutics Incorporated.

We were considered to be in the development stage prior to the second quarter of 2012 when we recorded significant revenue from our planned principal operations following commercialization of Korlym.

The accompanying unaudited balance sheet as of June 30, 2012, statements of comprehensive loss for the three- and six-month periods ended June 30, 2012 and 2011, and statements of cash flows for the six-month periods ended June 30, 2012 and 2011 have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 2011 included in our Annual Report on Form 10-K. The accompanying balance sheet as of December 31, 2011 has been derived from audited financial statements at that date.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to use assumptions and make estimates to form judgments about the carrying value of assets and liabilities reported in the financial statements and accompanying notes, the value of which we cannot readily determine from other sources. Actual results could differ materially from those estimates.

We evaluate our estimates and assumptions on an ongoing basis, including those related to our discounts for prompt payment of sales invoices, chargebacks and rebates, patient assistance, potential product returns, excess/obsolete inventories, allowances for doubtful accounts, accruals of clinical and preclinical expenses and contingent liabilities. We base our estimates on relevant experience and on other specific assumptions that we believe are reasonable.

We update these assumptions and estimates as new information becomes available. Any changes in estimates are recorded in the period of the change.

Cash and Cash Equivalents

We invest our excess cash in bank deposits, money market accounts, corporate debt securities, and obligations of the U.S. government and U.S. government sponsored entities. We consider all highly liquid investments purchased with maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents are carried at fair value, which approximates cost and, as of June 30, 2012 and December 31, 2011, all of our funds were invested in cash and cash equivalents that consist of a money market fund maintained at a major U.S. financial institution.

 

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CORCEPT THERAPEUTICS INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS, continued

 

Credit Risks and Concentrations

We have a concentration of credit risk related to our cash and cash equivalents. We are exposed to credit risk in the event of default by the financial institutions holding these funds to the extent of the amount recorded on our balance sheet. We mitigate this risk by investing in a money market fund that invests primarily in short-term U.S. Treasury notes and bills. For the six-month periods ended June 30, 2012 and 2011, we experienced no loss or lack of access to cash and cash equivalents in our operating or investment accounts.

Beginning with the commercialization of Korlym in April 2012, we are also exposed to credit risk in regard to our trade receivables. We have only two customers — one specialty pharmacy and one specialty distributor, which are subsidiaries of the same corporate parent. We extend credit to these customers based on their individual creditworthiness and that of their shared parent organization. We monitor our exposure and will record a reserve against uncollectible trade receivables as necessary.

We also have a concentration of risk in regard to the manufacture of our product. As of June 30, 2012, we had one manufacturer of Korlym tablets, which has indicated that it will temporarily suspend commercial production in the fourth quarter of 2012 while it relocates to a new facility. We have a contract with a potential second Korlym tablet manufacturer, to which we have transferred the production process and which has produced regulatory stability batches and established the required analytical testing methods. In June 2012, we submitted a New Drug Application (NDA) supplement to the FDA requesting approval of this manufacturer as a source of Korlym tablets. The Prescription Drug User Fee Act due date for the FDA’s response is October 27, 2012. If we are not able to qualify the new manufacturer and our pre-existing supplier is unable to make Korlym tablets in the quantities that we require, we may not have adequate inventory of Korlym tablets to meet demand.

Fair Value Measurements

Financial instruments are categorized in a fair value hierarchy that prioritizes the information used to develop assumptions for measuring fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 input), then to quoted prices (in non-active markets or in active markets for similar assets or liabilities), inputs other than quoted prices that are observable for the asset or liability, and inputs that are not directly observable, but that are corroborated by observable market data for the asset or liability (Level 2 input), then the lowest priority to unobservable inputs, for example, our own data about the assumptions that market participants would use in pricing an asset or liability (Level 3 input). Fair value is a market-based measurement, not an entity-specific measurement, and a fair value measurement should therefore be based on the assumptions that market participants would use in pricing the asset or liability.

No assets or liabilities in our financial statements are required to be measured at fair value other than our investment portfolio.

Trade Receivables

Trade receivables are recorded net of customer allowances for prompt payment and data services, doubtful accounts and sales returns. See the discussion below under “Net Product Sales” regarding the methods for estimation of these allowances and sales returns. Our estimate of the allowance for doubtful accounts is determined based on existing contractual payment terms, actual payment patterns of our customers and individual customer circumstances. To date, we have determined that an allowance for uncollectible trade receivables is not required.

Inventory

We consider regulatory approval of product candidates to be uncertain, and product manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained. We expense the manufacturing costs for product candidates incurred prior to regulatory approval as research and development expense as we incur them. When regulatory approval of a product is obtained, we begin capitalizing manufacturing costs related to the approved product into inventory.

 

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CORCEPT THERAPEUTICS INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS, continued

 

We value our inventories at the lower of cost or net realizable value. We determine the cost of inventory using the specific identification method on a first-in, first-out basis. We analyze our inventory levels quarterly and write down inventory that has become obsolete or has a cost basis in excess of its expected net realizable value, as well as any inventory quantities in excess of expected requirements. Any expired inventory is disposed of and the related costs are recognized as cost of sales in the statement of comprehensive loss.

Net Product Sales

We sell Korlym to a specialty pharmacy and a specialty distributor, which subsequently resell Korlym to patients and healthcare providers. We recognize product revenues from sales of Korlym upon delivery to our customers as long as (i) there is persuasive evidence that an arrangement exists between ourselves and the customer, (ii) collectability is reasonably assured and (iii) the price is fixed or determinable. In order to conclude that the price is fixed or determinable, we must be able to (i) calculate gross product revenues from the sales to our customers and (ii) reasonably estimate net product revenues.

We calculate gross product revenues based on the price that we charge our customers. We estimate our net product revenues by deducting from our gross product revenues (a) trade allowances, such as discounts for prompt payment and distributor fees, (b) estimated government rebates and chargebacks, (c) reserves for expected product returns and (d) estimated costs of patient assistance programs. We initially record estimates for these deductions at the time we recognize the gross revenue. We update our estimates on a recurring basis as new information becomes available.

Trade Allowances:  We offer our customers a discount on Korlym sales for payment within 30 days. We also offer them a small discount for the provision of data services. We expect our customers to earn these discounts and accordingly deduct them in full from gross product revenues and trade receivables at the time we recognize such revenues.

Rebates and Chargebacks:  We contract with Medicaid and other government agencies so that Korlym will be eligible for purchase by, or qualify for partial or full reimbursement from, such government programs. We estimate the rebates and chargebacks that we are obligated to provide to government programs and deduct these estimated amounts from our gross product sales at the time the revenues are recognized. We base our estimates of these rebates and chargebacks upon (i) the discount rates applicable to government-funded programs and (ii) information obtained from our vendors regarding the percentage of sales by our customers to patients who are covered by entities or programs that are eligible for such rebates and chargebacks.

Allowances for Patient Assistance Program:  We provide financial assistance to eligible patients whose insurance policies require them to pay high deductibles and co-pays. We estimate the cost of assistance to be provided under this program by applying our actual experience regarding such assistance to our estimate of the percentage of our sales in the period that will be provided to patients covered by the program.

Sales Returns:  Our customers have the right to return Korlym beginning six months before the labeled expiration date and ending 12 months after the labeled expiration date. This right of return is extended to our specialty distributor channel’s hospital customers who, generally, have the right to return only unopened bottles. The expiration date for our current Korlym inventory is two years after the manufacture of the tablets. We estimate the amount of Korlym that we believe will be returned and deduct that estimated amount from gross revenue at the time we recognize such revenue. When estimating future returns, we analyze quantitative and qualitative information including, but not limited to, actual return rates, the amount of product in the distribution channel, the expected shelf life of such product, current and projected product demand, the introduction of competing products that may erode demand, and broad economic and industry-wide indicators. If we cannot reasonably estimate product returns with respect to a particular sale, we defer recognition of revenue from that sale until we can make a reasonable estimate.

Cost of Sales

Cost of sales includes the cost of product (the cost to manufacture Korlym, which includes material, third-party manufacturing costs and indirect personnel and other overhead costs) based on units for which revenue is recognized in the current period, as well as costs of stability testing, logistics and distribution of the product. We began capitalizing Korlym production costs as inventory following approval by the FDA on February 17, 2012. Prior to receiving the FDA approval for Korlym, we expensed all costs related to the manufacturing of the product (including stability costs and manufacturing overhead) as incurred; we classified these costs as research and development expense. A portion of the product manufactured prior to FDA approval is available for us to use commercially.

 

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CORCEPT THERAPEUTICS INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS, continued

 

Research and Development

Research and development expenses consist of costs incurred for research and development activities that we sponsor, which costs are expensed as incurred. These costs include direct expenses, such as the cost of clinical trials, pre-clinical studies, manufacturing development, preparations for submissions to the FDA and efforts to prosecute and defend those submissions and the development of second-generation compounds, as well as research and development-related overhead expenses. We also expense as incurred nonrefundable payments to third parties and our cost of acquiring technologies and materials used in research and development that have no alternative future use.

We base our cost accruals for clinical trials, research and preclinical activities on estimates of work completed under service agreements, milestones achieved, patient enrollment and past experience with similar contracts. Our estimates of work completed and associated cost accruals include our assessments of information from third-party contract research organizations and the overall status of clinical trial and other development and administrative activities.

Segment Reporting

We determine our operating segments based on the way we organize our business to make operating decisions and assess performance. We have only one operating segment, which concerns the discovery, development and commercialization of pharmaceutical products.

Stock-Based Compensation

Stock-based compensation for employee and director options

We account for stock-based compensation of option grants to employees and directors under the fair value method, based on the fair value-based measurement of the award at the grant date. For service-based awards, we recognize expense over the requisite service period. For options with performance-based vesting criteria, we begin to recognize expense over the requisite service period when we believe there is a high degree of probability (i.e., greater than 70 percent) of achieving the vesting criteria.

Stock-based compensation expense related to non-employees

We recognize the expense of options granted to non-employees based on the fair-value based measurement of the option grants at the time of vesting. For service-based awards, we recognize expense over the requisite service period. For options with performance-based vesting criteria, we recognize expense based on the minimum number of shares that will vest over time as the criteria are met based on the Black-Scholes valuation of the vested shares.

2. Fair Value of Financial Instruments

As of June 30, 2012 and December 31, 2011, we had invested our financial assets in a money market fund that can be converted to cash at par on demand. We measured these funds, which totaled approximately $34.9 million and $39.6 million as of June 30, 2012 and December 31, 2011, respectively, at fair value, which approximates cost, as of the respective dates and classified them as Level 1 assets in the fair value hierarchy for financial assets.

We realized no gains or losses on investments during the three-month periods ended June 30, 2012 and 2011. We determined the cost of securities sold using the specific identification method.

 

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CORCEPT THERAPEUTICS INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS, continued

 

3. Composition of Certain Balance Sheet Items

The following tables present the composition of certain balance sheet items as of June 30, 2012 and December 31, 2011. All amounts are in thousands.

Inventory

 

     June 30,
2012
 

Raw materials

   $ 1,248   

Work in progress

     1,164   

Finished goods

     25   
  

 

 

 

Total inventory

   $ 2,437   
  

 

 

 

As we had no product approved by the FDA as of December 31, 2011, we had no inventory value on our balance sheet as of that date.

Other Accrued Liabilities

 

     June 30,
2012
     December 31,
2011
 

Professional fees

   $ 351       $ 292   

Commercialization costs

     30         80   

Legal fees

     112         46   

Manufacturing costs

     27         78   

Other

     101         37   
  

 

 

    

 

 

 

Total

   $ 621       $ 533   
  

 

 

    

 

 

 

4. Commitments

During the six months ended June 30, 2012, we placed purchase orders with Produits Chimiques Auxiliaires et de Synthese SA (PCAS) for the acquisition of mifepristone, the active pharmaceutical ingredient (API) in Korlym, for delivery during 2012 for aggregate commitments of approximately $2.8 million, approximately $1.2 million of which we received and recorded as inventory prior to June 30, 2012. See Note 8, for an additional purchase order placed with PCAS in July 2012.

As of June 27, 2012, we signed an amendment to the lease for our office space that reflected an expansion of the space and extended our occupancy through December 2013. The aggregate commitment for base rent through the term of the amendment is approximately $630,000, approximately $202,000 of which will be incurred during the remainder of 2012. The amended lease provides us with an option to extend the lease for one additional year.

5. Capital Stock

On March 3, 2012, two investors exercised warrants for the purchase of our common stock with exercise prices ranging from $2.77 to $2.96 per share. As a result, we issued 93,082 shares of common stock and generated aggregate proceeds of approximately $267,000.

On March 29, 2012, we issued approximately 4.2 million shares of our common stock upon the exercise of warrants that we had issued in a private placement transaction in April 2010 at an exercise price of $2.96 per share and sold new warrants to the same investors to purchase approximately 4.2 million shares of common stock at an exercise price of $4.05 per share. The new warrants are exercisable through March 29, 2015. We generated net proceeds in these transactions of approximately $12.9 million, after the deduction of issuance costs. Venture capital funds, trusts and other entities affiliated with members of our Board of Directors purchased approximately 40 percent of the securities sold in this transaction, with the remainder being purchased by other qualified investors.

See Note 8—Subsequent Events, for a discussion of additional shares of common stock sold in July 2012.

 

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CORCEPT THERAPEUTICS INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS, continued

 

6. Stock Option Plans

We have three stock option plans — the 2000 Stock Option Plan (the 2000 Plan), the 2004 Equity Incentive Plan (the 2004 Plan) and the 2012 Incentive Award Plan (the 2012 Plan).

All option grants under the 2000 Plan are fully vested. In 2004, our board of directors and stockholders approved the 2004 Plan, which became effective upon the completion of our initial public offering (IPO). Subsequent to the IPO, no options were or will be issued under the 2000 Plan. Under the 2004 Plan, stock options were issued to our employees, officers, directors and consultants. The 2004 Plan provided that the exercise price for incentive stock options would be no less than 100 percent of the fair value of our common stock, as of the date of grant. Options granted under the 2004 Plan vest over periods ranging from one to five years. The vesting period of the options is generally equivalent to the requisite service period.

In November 2011, our Board of Directors authorized an increase in the shares available for issuance under the 2004 Plan equal to 4 percent of the shares of our common stock outstanding as of December 31, 2011, pursuant to the terms of the 2004 Plan. Accordingly, as of January 1, 2012, the shares available for issuance under the 2004 Plan increased by a total of 3,369,249 shares.

In February 2012, our Board of Directors and stockholders approved the 2012 Plan, which became effective upon its approval at our Annual Meeting of Stockholders on June 13, 2012. As of the effective date of the 2012 Plan, approximately 5.3 million shares that remained available for issuance of new grants under the 2004 Plan were transferred to the 2012 Plan. After that date, no additional options were or will be issued under the 2004 Plan. Vested options under the 2000 Plan and the 2004 Plan that are not exercised within the remaining contractual life and any options under the 2004 Plan that do not vest because of terminations after the effective date of the 2012 Plan will be added to the pool of shares available for future grants under the 2012 Plan.

Under the 2012 Plan, we can issue options, stock purchase and stock appreciation rights and restricted stock awards to our employees, officers, directors and consultants. The 2012 Plan provides that the exercise price for incentive stock options will be no less than 100 percent of the fair value of our common stock, as of the date of grant. Options granted under the 2012 Plan are expected to vest over periods ranging from one to four years. We expect the vesting period of the options that we grant under the 2012 Plan to be generally equivalent to the requisite service period.

During the six-month period ended June 30, 2012, we issued an aggregate of 135,000 shares of our common stock upon the exercise of stock options.

The following table provides a summary of non-cash stock-based compensation. All figures are in thousands.

 

     Three Months  Ended
June 30,
     Six Months Ended
June 30,
 
         2012              2011          2012      2011  

Research and development

   $ 138       $ 267       $ 256       $ 323   

Selling, general and administrative

     744         602         3,015         1,126   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-cash stock-based compensation

   $ 882       $ 869       $ 3,271       $ 1,449   
  

 

 

    

 

 

    

 

 

    

 

 

 

The data in the table above for the six-month period ended June 30, 2012 includes approximately $1.3 million of non-cash stock-based compensation expense, which is classified as selling, general and administrative expense, related to performance-based stock option awards to officers that vested in February 2012 upon the FDA approval of Korlym. The data in the table above for the three- and six-month periods ended June 30, 2011 includes approximately $192,000 of non-cash stock-based compensation expense, which is classified as research and development expense, related to a performance-based stock option award to a consultant that vested in June 2011 upon the filing by the FDA of our NDA for Korlym. All other stock-based compensation in the periods presented relates to service-based option awards.

 

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CORCEPT THERAPEUTICS INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS, continued

 

7. Net Loss Per Share

Basic and diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during each period. The computed net loss per share for each period, including the number of weighted-average shares outstanding, is shown on the face of the statements of comprehensive loss.

The following table presents information on securities outstanding as of the end of each period that could potentially dilute the per share data in the future. All figures are in thousands.

 

     June 30,  
     2012      2011  

Warrants outstanding

     9,026         9,200   

Stock options outstanding

     10,700         9,874   
  

 

 

    

 

 

 

Total

     19,726         19,074   
  

 

 

    

 

 

 

In July 2012, we sold 11.0 million shares of our common stock. (See Note 8 — Subsequent Events.)

8. Subsequent Events

Sale of Capital Stock

On July 6, 2012, we sold 11.0 million shares of our common stock in an underwritten public offering for aggregate net proceeds of approximately $46.1 million after deducting expenses of the offering.

Purchase Commitment

In July 2012, we placed an additional purchase order with PCAS for delivery of mifepristone in the fourth quarter of 2012 or early 2013 for a commitment of approximately $843,000.

Financing Transaction with Biopharma

On August 2, 2012, we executed a transaction (Transaction) with Biopharma Secured Debt Fund II Sub, S.àr.l, a private limited liability company organized under the laws of Luxembourg (Biopharma). Under the terms of the Transaction, we will receive $30 million at the closing, which is anticipated to occur on or about August 16, 2012. In return, we are obligated to make payments, calculated as a percentage of our net sales of Korlym, any future mifepristone-based products and our selective GR-II antagonists (together referred to as Covered Products) and any upfront, milestone or other contingent payments with respect to Covered Products. Biopharma’s right to receive payments will expire once it has received cumulative payments of $45 million.

Under the terms of the Transaction, our payments are entirely variable, with no fixed minimums. If there are no net sales, upfront, milestone or other contingent payments in a period with respect to Covered Products, then no payment will be due for that period.

We are obligated to make payments as follows:

 

   

20 percent of our net product sales of Covered Products, beginning with the calendar quarter ending June 30, 2013, subject to quarterly payment caps of $2,250,000 during 2013, $3,000,000 during 2014 and $3,750,000 during 2015. There is no quarterly cap on payments with respect to net product sales in 2016 and later.

 

   

20 percent of payments received for upfront, milestone or other contingent fees under co-promotion and out-license agreements for Covered Products (without application of quarterly caps), provided however, that any amounts received under such agreements after the Transaction’s effective date of August 2, 2012 but before June 30, 2013 would be deferred and made simultaneously with the payment for the calendar quarter ending June 30, 2013.

 

   

The percentage used to calculate our payments to Biopharma would increase to 50 percent and any applicable payment caps would lapse if we (i) fail to provide Biopharma with certain information regarding our promotion and sales of Covered Products, (ii) do not devote a commercially reasonable amount of resources to the promotion and marketing of the Covered Products or (iii) violate the Indebtedness Covenant and, in each case, fail to cure within the applicable cure period.

 

   

Upon the occurrence of a Corcept change of control transaction or the licensing of Korlym to a third-party for promotion and sale in the United States, the entire $45 million, less any amounts already paid by us, would become due.

 

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CORCEPT THERAPEUTICS INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS, continued

 

To secure our obligations in connection with this Transaction, we granted Biopharma a security interest in our rights in patents, trademarks, trade names, domain names, copyrights, know-how and regulatory approvals related to the Covered Products, all books and records relating to the foregoing and all proceeds of the foregoing (the Collateral). If we (i) fail to deliver a royalty payment when due and do not remedy that failure within 30 days, (ii) fail to maintain a first-priority perfected security interest in the Collateral in the United States and do not remedy that failure within five business days of receiving notice of such failure or (iii) become subject to an event of bankruptcy, then Biopharma may attempt to recover up to $45 million (after deducting any payments we have already made).

Committed Equity Financing Facility

In addition, effective August 7, 2012, we terminated our Committed Equity Financing Facility (CEFF) with Kingsbridge Capital Limited (Kingsbridge). The termination of the CEFF has no effect on the warrant that was issued to Kingsbridge for 330,000 shares of our common stock, which can be exercised at any time through September 25, 2013 for an exercise price of $3.525 per share.

 

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a pharmaceutical company engaged in the discovery, development and commercialization of drugs for the treatment of severe metabolic and psychiatric disorders. Our focus is on disorders associated with the steroid hormone cortisol. Elevated levels and abnormal release patterns of cortisol have been implicated in a broad range of human disorders.

Since our inception in May 1998, we have been developing mifepristone, a potent glucocorticoid receptor II (GR-II) antagonist. On February 17, 2012, the FDA approved Korlym™ (mifepristone) 300 mg Tablets in the United States as a once-daily oral medication for treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery. We released Korlym for sale on April 10, 2012. We also have an on-going phase 3 study of mifepristone, the active ingredient in Korlym, for treatment of the psychotic features of psychotic depression. We have discovered three series of novel selective GR-II antagonists.

Unless otherwise stated, all references in this document to “we,” “us,” “our,” “Corcept,” the “Company,” “our company” and similar designations refer to Corcept Therapeutics Incorporated.

Cushing’s Syndrome. Cushing’s syndrome is a disorder caused by prolonged exposure of the body’s tissues to high levels of the hormone cortisol. Sometimes called “hypercortisolism,” it is uncommon and most often affects adults aged 20 to 50. An estimated 10 to 15 of every one million people are newly diagnosed with this syndrome each year, resulting in approximately 3,000 new patients and an estimated prevalence of 20,000 patients with Cushing’s syndrome in the United States.

As discussed above, the FDA approved our NDA for Korlym on February 17, 2012. This approval allows us to market Korlym in the United States for the approved indication. We are carrying out our commercial launch plans, including hiring a small number of medical science liaisons (MSLs), to launch Korlym in the United States.

We have Orphan Drug Designations for Korlym from the FDA for the approved indication and from the European Commission for the treatment of endogenous Cushing’s syndrome. Orphan Drug Designation in the United States is a special status granted by the FDA to encourage the development of treatments for diseases or conditions that affect fewer than 200,000 patients in the United States. Drugs that receive Orphan Drug Designation obtain seven years of marketing exclusivity for the approved indication from the date of drug approval, as well as tax credits for clinical trial costs, marketing application filing fee waivers and assistance from the FDA in the drug development process. Benefits of Orphan Drug Designation in the EU are similar to those in the U.S., but include ten years of marketing exclusivity for the approved indication in all 27 member states, free scientific advice during drug development, access to a centralized review process and a reduction or complete waiver of fees levied by the European Medicines Agency.

Psychotic Depression. We are also developing mifepristone, the active ingredient in Korlym, for the treatment of the psychotic features of psychotic depression under an exclusive patent license from Stanford University. The FDA has granted “fast track” status to evaluate the safety and efficacy of mifepristone for the treatment of the psychotic features of psychotic depression.

In March 2008, we began enrollment in Study 14, our ongoing phase 3 trial in psychotic depression. The protocol for this trial incorporates what we have learned from our three previously completed phase 3 trials. It attempts to address the established relationship between increased drug plasma levels and clinical response and attempts to decrease the random variability observed in the results of the psychometric instruments used to measure efficacy. In one of the previously completed phase 3 trials, Study 06, we prospectively tested and confirmed that patients whose plasma levels rose above a predetermined threshold statistically separated from both those patients whose plasma levels were below the threshold and those patients who received placebo; this threshold was established from data produced in earlier studies.

As expected, the group of patients who took 1200 milligrams (mg) of mifepristone in Study 06 developed higher drug plasma levels than did the groups of patients who received lower doses. Further, there was no discernable difference in the incidence of adverse events between patients who received placebo in Study 06 and those who received 300 mg, 600 mg or 1200 mg of mifepristone in that study. In August 2011, we published our analysis of these data in The Journal of Clinical Psychopharmacology . Based on this information, we are testing a mifepristone dose of 1200 mg once per day for seven days in Study 14.

 

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In addition, we are using a third party centralized rating service to independently evaluate the patients for entry into the study as well as to evaluate their level of response throughout their participation in the study. We believe the centralization of this process will improve the consistency of rating across clinical trial sites and reduce the background statistical noise that was observed in earlier studies and is endemic to psychopharmacologic studies. We believe that this change in dose, as well as the other modifications to the protocol, should allow us to demonstrate the efficacy of mifepristone in the treatment of the psychotic symptoms of psychotic depression. In mid-2009, to conserve financial resources, we reduced the number of clinical sites in this study to eight and extended the timeline for its completion.

Enrollment in Study 14 is ongoing. Our goal is to complete enrollment by the end of 2013. To help reach this goal, we plan to increase the number of clinical sites from eight to approximately 20 over the next year.

Antipsychotic-induced Weight Gain Mitigation. In 2005, we announced the results of studies in rats that demonstrated that mifepristone both reversed the weight gain associated with the ongoing use of olanzapine and mitigated the weight gain associated with the initiation of treatment with olanzapine (the active ingredient in Zyprexa ® ). The results from this study were published in the journal Brain Behavioral Research in early 2006. This study was paid for by Eli Lilly and Company (Eli Lilly).

During 2007, we announced positive results from our clinical proof-of-concept study in lean healthy male volunteers evaluating the ability of mifepristone to mitigate weight gain associated with the use of Zyprexa. The results showed a statistically significant reduction in weight gain in those subjects who took Zyprexa plus mifepristone compared to those who took Zyprexa plus placebo. Also, the addition of mifepristone to treatment with Zyprexa had a beneficial impact on secondary metabolic measures such as fasting insulin, triglycerides and abdominal fat, as indicated by waist circumference. Eli Lilly provided Zyprexa and financial support for this study, the results of which were published in the journal Advances in Therapy in 2009. In January 2009, we announced positive results from a similar proof-of-concept study evaluating the ability of mifepristone to mitigate weight gain associated with the use of Johnson & Johnson’s Risperdal ® . This study confirmed and extended the earlier results seen with mifepristone and Zyprexa, demonstrating a statistically significant reduction in weight gain and in the secondary metabolic endpoints of fasting insulin, triglycerides and abdominal fat, as indicated by waist circumference. The results from the study of mifepristone and Risperdal were presented at several scientific conferences, including the American Diabetes Association meeting in June 2009, and were published in the journal Obesity in 2010.

The combination of Zyprexa or Risperdal and mifepristone is not approved for any indication. The purpose of these studies was to explore the hypothesis that GR-II antagonists, such as mifepristone and our next generation of selective GR-II antagonists, would mitigate weight gain associated with antipsychotic medications. The group of medications known as second generation antipsychotic medication, including Zyprexa, Risperdal, Clozaril ® and Seroquel ® , are widely used to treat schizophrenia and bipolar disorder. All medications in this group are associated with treatment-emergent weight gain of varying degrees and carry a warning in their labels relating to treatment-emergent hyperglycemia and diabetes mellitus.

Selective GR-II Receptor Antagonists. In 2003, we initiated a discovery research program to identify and patent selective GR-II antagonists with the intent of developing a pipeline of products for proprietary use. Three distinct series of GR-II antagonists were identified. These compounds, like our lead product candidate mifepristone, potently block the cortisol receptor (GR-II) but, unlike mifepristone, they do not appear to block the PR (progesterone), ER (estrogen), AR (androgen) or GR-I (mineralocorticoid) receptors. Both the United States Patent & Trademark Office (USPTO) and the European Patent Office (EPO) have issued to us composition of matter patents on all of the three series. A fourth composition of matter patent application is pending.

Several of our new compounds have demonstrated positive results in animal models for the prevention and reversal of anti-psychotic-induced weight gain. One of them, CORT 108297, is in phase 1b/2a clinical trials. We have identified other selective GR-II antagonists from our proprietary series that we believe may have utility as therapeutic agents in a variety of diseases. Our intent is to continue our discovery research program with the goal of identifying new selective GR-II antagonists and to manufacture and conduct pre-clinical development on one or more of these compounds and to submit Investigational New Drug (IND) applications with respect to the most promising of them, as we deem appropriate.

At the American Diabetes Association conference in June 2009, there was also a presentation of preclinical data from another study of CORT 108297 conducted at Stanford University. This study demonstrated that CORT 108297 suppresses body weight gain and improves insulin sensitivity in healthy mice fed a 60 percent fat diet and high sucrose liquid. The results of these preclinical data were published in April 2011 in the journal Nutrition and Metabolism .

In addition, we are continuing research and pre-clinical efforts to identify additional selective GR-II antagonists for clinical study.

 

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General

Our activities to date have included:

 

   

product development, including drug formulation and manufacturing, as well as designing, funding and overseeing clinical trials and conducting non-clinical investigatory activities, such as toxicological testing;

 

   

discovery research;

 

   

regulatory affairs;

 

   

intellectual property prosecution and expansion; and

 

   

commercialization of Korlym, including hiring and training medical science liaisons, retention and management of third-party distribution partners, establishment of product reimbursement and patient assistance programs, and marketing activities.

Historically, we have financed our operations and internal growth primarily through private placements of our preferred and common stock and the public sale of common stock rather than through collaborative or partnership agreements. Therefore, we have no research funding or collaborative payments payable to us.

As of June 30, 2012, we had an accumulated deficit of $227.2 million. Our historical operating losses have resulted principally from our research and development activities, including clinical trial activities for mifepristone, discovery research, non-clinical activities such as toxicology and carcinogenicity studies, manufacturing process development and regulatory activities, as well as selling, general and administrative expenses, including preparations for the commercial launch of Korlym, which occurred in April 2012. We may continue to incur net losses over at least the next few years as we continue our mifepristone and selective GR-II antagonist clinical development programs, apply for regulatory approvals, continue discovery and initiate development of other selective GR-II antagonists for various indications, acquire and / or develop treatments in other therapeutic areas, establish sales and marketing capabilities and expand our operations.

Our business is subject to significant risks, including the risks inherent in our research and development efforts, the results of our mifepristone and other clinical trials, uncertainties associated with securing financing, uncertainties associated with obtaining and enforcing patents, our investment in manufacturing set-up, the management of our supply chain, the lengthy and expensive regulatory approval process and competition from other products. Our ability to successfully generate revenues in the foreseeable future is dependent upon our ability, alone or with others, to finance our operations and develop, obtain regulatory approval for, manufacture and market our lead product.

Results of Operations

Net Product Sales Net product sales includes product revenue resulting from sales to our customers, reduced by 1) trade allowances, such as discounts for prompt payment and distributor fees, 2) estimated government rebates and chargebacks, 3) reserves for expected product returns and 4) estimated costs of our patient assistance program.

In April 2012, we made Korlym commercially available in the United States to our specialty distributor and specialty pharmacy customers. For the three months ended June 30, 2012, we recognized approximately $875,000 in net product sales compared with none in the comparable period in 2011. To calculate net product sales, we deducted from gross sales estimates of prompt-pay discounts, distribution service fees, rebates and chargebacks owed to government payors and patient assistance programs, which amounts are not material for the quarter ended June 30, 2012.

Based on our limited experience marketing Korlym, it is difficult for us to predict the magnitude of product sales for any future quarter or for the year-ended December 31, 2012.

Cost of sales Cost of sales includes the cost of product (the cost to manufacture Korlym, which includes material, third-party manufacturing costs and indirect personnel and other overhead costs) based on units for which revenue is recognized in the current period, as well as costs of stability testing, logistics and distribution of the product. We began capitalizing Korlym production costs as inventory following approval by the FDA on February 17, 2012. Prior to receiving the FDA approval for Korlym, we expensed all costs related to the manufacturing of the product (including stability costs and manufacturing overhead) as incurred; we classified these costs as research and development expense. A portion of the product manufactured prior to FDA approval is available for us to use commercially.

 

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Cost of sales was approximately $48,000 for the three months ended June 30, 2012, which equals 5.5 percent of net product sales, the majority of which represented costs related to stability testing. The amount and timing of stability testing varies from period to period as determined by FDA regulations and our production schedule and is not proportional with sales volumes. In addition, the cost of manufacturing Korlym reflected in our cost of sales in 2012, and for some period thereafter, will not reflect the full cost of production because we have previously expensed the majority of the raw materials, labor and overhead costs incurred to produce the product sold during this period. We expect that our cost of sales as a percentage of net product sales of Korlym will fluctuate from quarter to quarter during 2012 and for some period thereafter as product manufactured prior to FDA approval, and therefore fully expensed, is consumed.

Research and development expenses Research and development expenses include 1) the personnel costs related to our development activities, including facilities costs and non-cash stock-based compensation, 2) the costs of discovery research, 3) costs associated with IND-enabling activities and pre-clinical studies, 4) costs of clinical trials, including trial preparation, enrollment, site monitoring and data management and analysis expenses, 5) regulatory costs, 6) the costs of manufacturing development, including the development and activities to qualify a second tablet manufacturing site, 7) the costs of manufacture and / or acquisition of clinical trial materials and material used in registration and validation batches included in the NDA submission for Korlym and 8) other costs associated with the preparation and prosecution of the Korlym NDA or other FDA submissions related to Korlym or other product candidates.

Research and development expenses decreased 57 percent to $2.7 million for the three-month period ended June 30, 2012 from $6.2 million for the comparable period in 2011. For the six-month period ended June 30, 2012, research and development expenses decreased 44 percent to $6.2 million from $11.1 million for the comparable period in 2011.

During the second quarter of 2012 as compared to the corresponding period in 2011, there was an increase of approximately $108,000 in staffing costs, which includes increases of approximately $63,000 for stock-based compensation expenses related to employees working in research and development functions. During the six-month period ended June 30, 2012 as compared to the corresponding period in 2011, there was an increase of approximately $712,000 in staffing costs, which includes bonuses paid on FDA approval of Korlym in the amount of approximately $441,000 and increases of approximately $125,000 for stock-based compensation expenses related to employees working in research and development functions. During the second quarter and first half of 2012 as compared to the corresponding periods in 2011, there were decreases of approximately $1.2 million and $1.9 million, respectively, in consultancy costs, due primarily to the additional resources required during 2011 for the preparation, submission and prosecution of the NDA, which was submitted in April 2011 and filed by the FDA in June 2011. Additionally, stock-based compensation expense decreased approximately $192,000 during both the second quarter and first half of 2012 as compared to the corresponding periods of 2011 due to non-cash stock-based compensation costs related to a stock option award to a consultant that vested in its entirety on the acceptance of the NDA by the FDA in June 2011.

Korlym manufacturing costs categorized as research and development expense decreased approximately $1.1 million and $1.6 million, respectively, during the second quarter and first half of 2012 as compared to the corresponding periods in 2011, due primarily to capitalizing to inventory the costs of Korlym’s active pharmaceutical ingredient and of the manufacture of Korlym tablets for commercial sale following the date of FDA approval. See discussion below under the caption “Critical Accounting Policies and Estimates”.

Clinical trial costs decreased approximately $901,000 and $1.4 million, respectively, during the second quarter and first half of 2012, as compared to the corresponding periods of 2011. During the second quarter and first half of 2012 as compared to the corresponding periods in 2011, there were decreases of approximately $1.1 million and $1.3 million, respectively, related to clinical studies with CORT 108297, decreases of approximately $184,000 and $110,000, respectively, related to our phase 3 study with mifepristone for the treatment of psychotic depression, and decreases of approximately $190,000 and $394,000, respectively, related to the clinical trials with Korlym in the treatment of Cushing’s syndrome. These decreases were partially offset by increases of approximately $564,000 and $415,000, respectively, for the second quarter and first half of 2012 as compared to the corresponding periods of 2011 related to drug-drug interaction and other NDA-supportive studies with Korlym.

In addition, costs related to financial support for medical conferences and seminars in support of our Cushing’s syndrome program decreased approximately $241,000 and $391,000, respectively, in the second quarter and first half of 2012 as compared to the corresponding periods of 2011, because subsequent to product approval the nature of our activities at medical meetings has changed, and now such costs relate to marketing activities that are classified as a component of selling, general and administrative expenses. Costs relating to IND-enabling activities and research efforts regarding our new GR-II antagonists decreased approximately $150,000 and $200,000 during the second quarter and first half of 2012, respectively, as compared to the corresponding periods in 2011.

 

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Below is a summary of our research and development expenses by major project:

 

     Three-Months Ended
June 30,
     Six-Months Ended
June 30,
 

Project

       2012              2011              2012              2011      
     (in thousands)      (in thousands)  

Korlym

   $ 823       $ 3,291       $ 2,238       $ 5,565   

Mifepristone for Psychotic Depression

     373         596         896         977   

Selective GR-II antagonists

     593         1,743         1,664         2,868   

Unallocated activities, including NDA supportive studies and manufacturing, regulatory and pre-clinical activities

     741         306         1,156         1,394   

Stock-based compensation

     138         267         256         323   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total research and development expense

   $ 2,668       $ 6,203       $ 6,210       $ 11,127   
  

 

 

    

 

 

    

 

 

    

 

 

 

We expect that research and development expenditures will decrease during the remainder of 2012 as compared to 2011 as increases in costs associated with the continuation of our phase 3 study of mifepristone for the treatment of psychotic depression, and the continued development of our other proprietary selective GR-II antagonists will be more than offset by decreases in the costs related to the completion of our phase 3 study in Cushing’s syndrome. Research and development expenses in 2013 and future years will be largely dependent on our strategic priorities and the availability of additional funds to finance clinical development plans. See also, “Liquidity and Capital Resources”.

Many factors can affect the cost and timing of our trials including inconclusive results requiring more clinical trials, slow patient enrollment, adverse side effects in study patients, insufficient supplies for our clinical trials and real or perceived lack of effectiveness or safety of the drug in our trials. The cost and timing of development of our selective GR-II antagonists will depend on the success of our efforts and any difficulties that we may encounter. In addition, the development of all of our product candidates will be subject to extensive governmental regulation. These factors make it difficult for us to predict the timing and costs of the further development and approval of our product candidates.

Selling, general and administrative expenses Selling, general and administrative expenses include 1) personnel and consultancy costs related to administrative and commercialization activities, including facilities costs and non-cash stock-based compensation, 2) expenses of third-party vendors that we engaged to execute our commercial plans related to Korlym, including conducting market research, providing market analytics, developing reimbursement support services and, distribution and other logistical needs related to our commercialization of Korlym and 3) legal, accounting and other professional fees.

For the three-month period ended June 30, 2012, selling, general and administrative expenses increased to $5.8 million from $2.7 million for the comparable period in 2011. For the six-month period ended June 30, 2012, selling, general and administrative expenses increased to $13.2 million from $4.8 million for the comparable period in 2011.

During the second quarter and first half of 2012 as compared to the corresponding periods in 2011, staffing and consultancy costs increased approximately $1.1 million and $4.8 million, respectively, due primarily to additional resources necessary to engage in commercialization of Korlym. These increases included approximately $142,000 and $1.9 million, respectively, for the second quarter and first half periods related to increases in non-cash stock-based compensation costs for stock options granted to employees, directors and consultants, of which approximately $1.3 million consisted of performance-based stock option awards to officers that vested in February 2012 upon the FDA approval of Korlym. We also awarded approximately $1.6 million in cash bonuses in the first quarter of 2012 to employees working in selling, general and administrative functions in recognition of the FDA’s approval of Korlym.

In addition, other professional services costs related to commercialization activities and other corporate matters increased approximately $1.8 million and $3.2 million, respectively, during the second quarter and first half of 2012 as compared to the corresponding periods of 2011.

We expect that selling, general and administrative expenses will increase during the remainder of 2012 as compared to 2011 in regard to activities directly associated with product commercialization and the need to continue building our administrative infrastructure to support these activities. The level of selling, general and administrative activities and related expenses in 2013 and future years will be largely dependent on our assessment of the staff and other services necessary to support product commercialization and our continued clinical development activities and the availability of additional funds. See also, “Liquidity and Capital Resources.”

 

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Liquidity and Capital Resources

We have incurred operating losses since inception, and at June 30, 2012, we had an accumulated deficit of $227.2 million. Since our inception, we have relied primarily on the proceeds from public and private sales of our equity securities to fund our operations.

At June 30, 2012, we had cash and cash equivalents of $34.9 million, compared to $39.6 million at December 31, 2011. Net cash used in operating activities for the six-month periods ended June 30, 2012 and 2011 was $18.0 million and $14.5 million, respectively. We used cash in each period primarily for research and development activities, including efforts toward the submission and prosecution of the NDA for Korlym and to develop administrative infrastructure to support the commercialization of Korlym.

On July 6, 2012, we sold 11.0 million shares of our common stock in an underwritten public offering for net proceeds of approximately $46.1 million after deducting expenses of the offering.

As discussed in Note 8 of our financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we entered into a Transaction with Biopharma on August 2, 2012 under which we will receive $30 million at closing, which we expect to occur on or about August 16, 2012. Pursuant to the Transaction, beginning with the quarter ending June 30, 2013, we will make quarterly payments equal to (i) 20 percent of our net product sales of Covered Products, subject to certain quarterly payment caps through 2015 and (ii) 20 percent of any upfront, milestone or other contingent payments we receive under co-promotion or out-licensing agreements with respect to Covered Products (without application of caps), until we have made cumulative payments of $45 million. Under the terms of the Transaction, our payments are entirely variable, with no fixed minimums. If there are no net sales, upfront, milestone or other contingent payments in a period with respect to Covered Products, then no payment will be due for that period.

We expect cash used in operating activities to increase during the remainder of 2012 as compared to spending levels in 2011 due to the commercialization of Korlym, the continuation and scale-up of our phase 3 clinical trial of mifepristone for the treatment of psychotic depression and the continued development of our selective GR-II antagonists, which will be only partially offset by sales of Korlym. We expect our funding requirements for operating activities may increase in 2013 and possibly beyond as costs associated with the continuation of our development program for Cushing’s syndrome, continuation and expansion of our development programs for psychotic depression and our selective GR-II antagonists, research activities, commercialization activities and selling, general and administrative expenses may be only partially offset by revenues from sales of Korlym.

We may choose to raise additional funds at some time in the future to continue and expand the development of our proprietary selective GR-II antagonists. We cannot be certain that additional funding will be available on acceptable terms or at all. Further, any additional equity financing may be dilutive to stockholders, and any debt financing, if available, may involve restrictive covenants. If we obtain funds through collaborations with others, these arrangements may be on unfavorable terms or may require us to relinquish certain rights to our technologies or product candidates, including potentially our lead product candidate that we would otherwise seek to develop on our own.

In March 2008, we entered into a CEFF with Kingsbridge, under which the determination of the timing and amount of any CEFF financings were to be made solely by us, subject to certain conditions. Under the terms of the CEFF, Kingsbridge had agreed to provide at our sole option, subject to certain conditions, up to $60 million of capital in exchange for newly issued shares of our common stock. Through June 30, 2012, we raised a total of approximately $2.6 million from sales of approximately 1.0 million shares of stock under the CEFF. As discussed in Note 8 of our financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, effective August 7, 2012, we terminated the CEFF. No further securities will be sold under this agreement.

While we monitor the cash balance in our checking account and transfer the funds in only as needed, these cash balances and our money market fund could be impacted if the underlying financial institution were to fail or were subject to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to cash in our checking accounts or money market fund.

As a result of volatile market conditions over the past few years, the cost and availability of capital has been and may again be adversely affected by illiquid capital markets. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. Renewed or increased turbulence in the U.S. and international markets and economies and declines in business or consumer spending may adversely affect our liquidity and financial condition, including our ability to access the capital markets to meet liquidity needs.

 

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Contractual Obligations and Commercial Commitments

During the six months ended June 30, 2012, we placed purchase orders with Produits Chimiques Auxiliaires et de Synthese SA (PCAS) for the acquisition of mifepristone, the active pharmaceutical ingredient (API) in Korlym, for delivery during 2012 for aggregate commitments of approximately $2.8 million, approximately $1.2 million of which was received and recorded as inventory prior to June 30, 2012. In July 2012, we placed an additional purchase order with PCAS for delivery of mifepristone in the fourth quarter of 2012 or early 2013 for a commitment of approximately $843,000.

In addition, as of June 27, 2012, we signed an amendment to the lease for our office space that reflected an expansion of the space and extended our occupancy through December 2013. The aggregate commitment for base rent through the term of the amendment is approximately $630,000, approximately $202,000 of which will be incurred during the remainder of 2012. The amended lease provides us with an option to extend the lease for one additional year.

As discussed above under the caption “Liquidity and Capital Resources”, on August 2, 2012, we entered into a Transaction with Biopharma. Under the terms of the Transaction, we will receive $30 million from Biopharma on the closing, which we expect to occur on or about August 16, 2012. In consideration of the $30 million payment, we are obligated to make payments to Biopharma totaling $45 million, calculated as a percentage of our net sales of Covered Products and any upfront, milestone or other contingent payments with respect to Covered Products. The payments we are required to make are entirely variable, with no fixed minimums. Biopharma’s right to receive to receive the payments will expire once it has received cumulative payments of $45 million.

Our first such payment will be due with respect to net sales of Covered Products during the quarter ended June 30, 2013 and any upfront, milestone or other contingent payments that we have received with respect to licensing or co-promotion agreements concerning Covered Products from the date of the Transaction through June 30, 2013. A further description of the terms of this transaction is set forth in Note 8 of our financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. During the three months ended June 30, 2012, we did not make any significant changes to our critical accounting policies and estimates other than the adoption of accounting policies for product sales, inventory and cost of sales that were adopted in April 2012 in connection with our initial commercialization of Korlym. Below is a description of the accounting policies and estimates in regard to these matters.

Net Product Sales

We sell Korlym to a specialty pharmacy and a specialty distributor, which subsequently resell Korlym to patients and healthcare providers. We recognize product revenues from sales of Korlym upon delivery to our customers as long as (i) there is persuasive evidence that an arrangement exists between ourselves and the customer, (ii) collectability is reasonably assured and (iii) the price is fixed or determinable. In order to conclude that the price is fixed or determinable, we must be able to (i) calculate gross product revenues from the sales to our customers and (ii) reasonably estimate net product revenues.

We calculate gross product revenues based on the price that we charge our customers. We estimate our net product revenues by deducting from our gross product revenues (a) trade allowances, such as discounts for prompt payment and distributor fees, (b) estimated government rebates and chargebacks, (c) reserves for expected product returns and (d) estimated costs of patient assistance programs. We initially record estimates for these deductions at the time we recognize the gross revenue. We update our estimates on a recurring basis as new information becomes available.

 

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Trade Allowances:  We offer our customers a discount on Korlym sales for payment within 30 days. We also offer them a small discount for the provision of data services. We expect our customers to earn these discounts and accordingly deduct them in full from gross product revenues and trade receivables at the time we recognize such revenues.

Rebates and Chargebacks:  We contract with Medicaid and other government agencies so that Korlym will be eligible for purchase by, or qualify for partial or full reimbursement from, such government programs. We estimate the rebates and chargebacks that we will be obligated to provide to government programs and deduct these estimated amounts from our gross product sales at the time the revenues are recognized. We base our estimates of these rebates and chargebacks upon (i) the discount rates applicable to government-funded programs and (ii) information obtained from our vendors regarding the percentage of sales by our customers to patients who are covered by entities or programs that are eligible for such rebates and chargebacks.

Allowances for Patient assistance Program:  We provide financial assistance to eligible patients whose insurance policies require them to pay high deductibles and co-pays. We estimate the cost of assistance to be provided under this program by applying our actual experience regarding such assistance to our estimate of the percentage of our sales in the period that will be provided to patients covered by the program.

Sales Returns:  Our customers have the right to return Korlym beginning six months before the labeled expiration date and ending 12 months after the labeled expiration date. This right of return is extended to our specialty distributor channel’s hospital customers who, generally, have the right to return only unopened bottles. The expiration date for our current Korlym inventory is two years after the manufacture of the tablets. We estimate the amount of Korlym that we believe will be returned and deduct that estimated amount from gross revenue at the time we recognize such revenue. When estimating future returns, we analyze quantitative and qualitative information including, but not limited to, actual return rates, the amount of product in the distribution channel, the expected shelf life of such product, current and projected product demand, the introduction of competing products that may erode demand, and broad economic and industry-wide indicators. If we cannot reasonably estimate product returns with respect to a particular sale, we defer recognition of revenue from that sale until such time as a reasonable estimate can be made.

Inventory and Cost of Sales

We consider regulatory approval of product candidates to be uncertain, and product manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained. We expense manufacturing costs for product candidates incurred prior to regulatory approval as research and development expenses as we incur them. When regulatory approval of a product is obtained, we begin capitalizing manufacturing costs related to the approved product into inventory.

We value our inventories at the lower of cost or net realizable value. We determine the cost of inventory using the specific identification method on a first-in, first-out basis. We analyze our inventory levels quarterly and write down inventory that has become obsolete or has a cost basis in excess of its expected net realizable value, as well as any inventory quantities in excess of expected requirements. Any expired inventory is disposed of and the related costs are recognized as cost of sales in the statement of comprehensive loss.

Cost of sales includes the cost of product (the cost to manufacture Korlym, which includes material, third-party manufacturing costs and indirect personnel and other overhead costs) based on units for which revenue is recognized in the current period, as well as costs of stability testing, logistics and distribution of the product. We began capitalizing Korlym production costs as inventory following approval by the FDA on February 17, 2012. Prior to receiving the FDA approval for Korlym, we expensed all costs related to the manufacturing of the product (including stability costs and manufacturing overhead) as incurred; we classified these costs as research and development expense. A portion of the product manufactured prior to FDA approval is available for us to use commercially.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The primary objective of our investment activities is to preserve principal. As of June 30, 2012, our cash and cash equivalents consisted primarily of a money market fund maintained at a major U.S. financial institution that invests primarily in United States Treasury securities. To minimize our exposure to interest rate risk, we limit the maturities of our investments to less than two years with an average maturity not to exceed one year. Due to the short-term nature of these instruments, a 1 percent increase or decrease in market interest rates would not have a material impact on the total value of our portfolio as of June 30, 2012.

 

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures . Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of June 30, 2012. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective in reaching a reasonable level of assurance that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and Form 10-Q and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

Changes in internal control over financial reporting . There were no changes in our internal control over financial reporting during the quarter ended June 30, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting other than our adoption of accounting policies for product sales, trade receivables, inventory and cost of sales in April 2012 in connection with our commercialization of Korlym.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

We are not currently involved in any material legal proceedings.

 

ITEM 1A. RISK FACTORS

An investment in our common stock involves significant risks. You should carefully consider the risks described below and the other information in this Quarterly Report on Form 10-Q, including our financial statements and related notes, before you decide to invest in our common stock. If any of the following risks or uncertainties actually occurs, our business, results of operations or financial condition could be materially harmed, the trading price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties described below are those that we currently believe may materially affect us; however, they may not be the only ones that we face. Additional risks and uncertainties of which we are unaware or currently deem immaterial may also become important factors that may harm our business. Except as required by law, we undertake no obligations to update any risk factors.

Risks Related to the Commercialization of Korlym

and Development of Mifepristone and Our Other Proprietary GR-II Antagonists

We depend heavily on the success of Korlym, which we only recently began to sell. If we are unable to commercialize Korlym successfully, or experience significant delays in doing so, we may not generate revenues as quickly as or at the levels that we or investors expect and our stock price will likely decline.

We anticipate that for the foreseeable future our ability to generate meaningful revenues and achieve profitability will be solely dependent on the successful commercialization of Korlym. Many factors could harm our efforts to commercialize Korlym, including:

 

   

an inability to generate meaningful revenue due to low product usage, inadequate reimbursement or other factors;

 

   

an inability to manufacture Korlym or the active ingredient in Korlym in commercial quantities and at an acceptable cost;

 

   

political concerns relating to other uses of mifepristone, or RU-486, that could limit the market acceptance of Korlym;

 

   

negative, inconclusive or otherwise unfavorable results from any post-approval studies we conduct;

 

   

previously unknown, serious side effects that may be identified;

 

   

rapid technological change making Korlym obsolete; and

 

   

competition from companies with greater financial, technical and marketing resources than ours.

Even if we are able to commercialize Korlym successfully, we cannot predict the rate at which success will occur.

As our current ability to generate revenue is wholly dependent upon the commercialization of Korlym, its rate of sale will directly and materially impact our results of operations. There are inherent difficulties in predicting the volumes at which Korlym will be sold and the potential for slower than anticipated adoption and manufacturing, distribution or other delays are heightened by our relative inexperience commercializing Korlym or other products. Failure of our revenue to meet the expectations of investors could cause our stock price to decline. See also the discussion below under “The failure of our financial results to meet estimates published by research analysts or other investor expectations could cause our stock price to decline.”

Physicians may accept Korlym slowly or may never accept it, which would adversely affect our financial results.

Many factors may affect the market acceptance and commercial success of Korlym.

Even though the FDA has approved Korlym, physicians may not adopt it as a treatment for their eligible patients. Physicians will prescribe Korlym only if they determine, based on experience, clinical data, side effect profiles and other factors, that it is preferable to other products or treatments currently in use, even if those products are not approved for Cushing’s syndrome. Because Cushing’s syndrome is rare, most physicians are inexperienced in the care of patients with the illness and it may be difficult to persuade them to prescribe a new treatment, such as Korlym, even with clinical trial results that suggest that it may be a compelling alternative treatment for them to consider. Acceptance of Korlym among influential practitioners may be essential for market acceptance of Korlym.

 

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Other factors that may affect the market acceptance and commercial success of Korlym include:

 

   

the effectiveness of Korlym, including any side effects, as compared to alternative treatment methods;

 

   

the rate of adoption of Korlym by physicians and by target patient populations;

 

   

the cost-effectiveness of Korlym and the availability of third-party insurance coverage and reimbursement, in particular from government payors such as Medicare and Medicaid, for patients using Korlym;

 

   

the product labeling required by the FDA for Korlym;

 

   

the extent and success of our efforts to manufacture, commercialize, market, distribute and sell Korlym; and

 

   

negative publicity concerning Korlym, RU-486, Mifeprex ® or mifepristone.

The failure of Korlym to achieve market acceptance would prevent us from generating meaningful revenue.

If we are unable to obtain acceptable prices or adequate coverage and reimbursement for Korlym from third-party payors, we will be unable to generate significant revenues.

There is significant uncertainty related to the availability of third-party insurance coverage and reimbursement for newly approved medications. The commercial success of our medications in both domestic and international markets depends on whether third-party coverage and reimbursement is available for them. Government payors, including Medicare and Medicaid, health maintenance organizations and other third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of new medicines, and, as a result, they may not cover or provide adequate payment for our medications. Our near-term dependence on the commercial success of Korlym makes us particularly susceptible to any such cost containment or reduction efforts. Accordingly, even though Korlym has been approved for commercial sale, unless government and other third-party payors provide adequate and timely coverage and reimbursement, physicians may not prescribe it and patients may not purchase it. In addition, meaningful delays in insurance coverage for individual patients may increase our costs and reduce our revenues. Further, we may need to obtain approvals from hospital formularies before Korlym can be reimbursed for in-patient treatment. If we fail to obtain such approvals, this will reduce the level of revenues that we are able to attain.

In some foreign markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the United States, we expect that there will continue to be federal and state proposals for similar controls. Also, the trends toward managed health care in the United States and recent laws and legislation intended to reduce the cost of government insurance programs could significantly influence the purchase of health care services and products and may result in lower prices for our products or the exclusion of such products from reimbursement programs.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, collectively referred to as the PPACA, was passed. The PPACA included, among other things, the following measures:

 

   

annual, non-deductible fees on any entity that manufactures or imports certain prescription drugs and biologics;

 

   

increases in Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program for both branded and generic drugs;

 

   

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical research;

 

   

new requirements for manufacturers to discount drug prices to eligible patients by 50 percent at the pharmacy level and for mail order services in order for their outpatient drugs to be covered under Medicare Part D;

 

   

an increase in the number of entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and

 

   

establishment of a licensure framework for follow-on biologic products.

The PPACA provisions on comparative clinical effectiveness research extended the initiatives of the American Recovery and Reinvestment Act of 2009, also known as the stimulus package, which included $1.1 billion in funding to study the comparative effectiveness of health care treatments. This stimulus funding was designated for, among other things, conducting, supporting or synthesizing research that compares and evaluates the risks and benefits, clinical outcomes, effectiveness and appropriateness of products. The PPACA also appropriated additional funding to comparative clinical effectiveness research. Although Congress has indicated that this funding is intended to improve the quality of health care, it remains unclear how the research will impact current Medicare coverage and reimbursement or how new information will influence other third-party payor policies.

 

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Since its passage, a number of state governors have strenuously opposed the mandatory purchase of insurance, referred to as the individual mandate, and aspects of voluntary Medicaid expansion under PPACA, and initiated lawsuits challenging its constitutionality. On June 28, 2012, the United States Supreme Court upheld the constitutionality of the individual mandate, and invalidated requirements that states forfeit certain federal funding if they do not expand Medicaid coverage as prescribed by PPACA. The Court left the remainder of PPACA intact. Congress has also proposed a number of legislative initiatives, including possible repeal of the PPACA. At this time, it remains unclear whether there will be any changes made to the PPACA, whether to certain provisions or its entirety.

In addition, other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. Most recently, on August 2, 2011, the Budget Control Act of 2011 among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve its targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2 percent per fiscal year, starting in 2013.

The PPACA and regulations and policies implementing this legislation, as well as other healthcare reform measures that may be adopted in the future, may have a material adverse effect on our industry generally and on our ability to successfully develop and commercialize our products.

The Orphan Drug Designation for Korlym may not provide protection from competition and other benefits as anticipated.

In July 2007, we received Orphan Drug Designation from the FDA for Korlym for the treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery. Drugs that receive Orphan Drug Designation obtain seven years of marketing exclusivity for the approved indication from the date of drug approval, as well as tax credits for clinical trial costs, marketing application filing fee waivers and assistance from the FDA in the drug development process.

In October 2011, the European Commission granted to us Orphan Drug Designation for Korlym for the treatment of endogenous Cushing’s syndrome (hypercortisolism) in the EU. Benefits of Orphan Drug Designation in the EU are similar to those in the United States, but include ten years of marketing exclusivity for the approved indication in all 27 member states, free scientific advice during drug development, access to a centralized review process and a reduction or complete waiver of fees levied by the European Medicines Agency.

Although we have received Orphan Drug Designation in both the United States and the EU, we cannot be assured that we will recognize the potential benefits of these designations. Even after an orphan drug is approved for its orphan indication, the FDA can subsequently approve a different drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. In addition, the FDA may, during the seven-year orphan drug exclusivity period, approve the same drug for a different indication.

We are also aware that Laboratoire HRA Pharma has received an Orphan Drug Designation in the United States and Europe for the use of mifepristone to treat a subtype of Cushing’s syndrome and has begun a Phase 2 clinical trial in Europe and the United States for this indication. We are also aware that Exelgyn Laboratories, which operates as a subsidiary of Medi Challenge (Pty) Ltd., received Orphan Drug Designation for Cushing’s syndrome in Europe, but it has stated that it has not yet conducted any clinical trials.

If another drug with mifepristone as its active ingredient is approved in the EU for Cushing’s Syndrome before Korlym, we will not receive the ten years of marketing exclusivity from the date of drug approval in the EU and other benefits that we anticipate. Any delay in our commercialization of Korlym may have a negative impact on the revenue that we might be able to realize from the exclusivity provided during the applicable periods.

 

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We may face competition from companies that attempt to develop mifepristone or other compounds for the treatment of Cushing’s syndrome, which could limit our future revenues from the commercialization of Korlym and which could have a negative impact on future revenues from the commercialization of Korlym for any indication. These companies may have significantly more resources than we do.

We may experience competition from Novartis, which has received approval in the EU to market its somatostatin analogue, pasireotide, for the treatment of patients with Cushing’s disease (a subset of the patients with Cushing’s syndrome) who have failed or are not candidates for surgery. In the United States, Novartis completed its phase 3 trial of pasireotide in Cushing’s disease and submitted an NDA to the FDA in June 2011. It withdrew this NDA in October 2011 due to an unspecified issue related to its chemistry, manufacturing and controls, but has stated that it plans to resubmit its NDA. In April 2012, Novartis initiated an expanded access study that makes pasireotide available internationally and in the United States to certain patients with Cushing’s disease who would otherwise not be able to participate in a clinical trial of the drug.

In addition, we are aware that Laboratoire HRA Pharma has begun a Phase 2 clinical trial in Europe and the United States evaluating the use of mifepristone to treat a subtype of Cushing’s syndrome, and that Exelgyn Laboratories may be planning to develop a Cushing’s syndrome product, although it has stated that it has not conducted any clinical trials to date. See also the discussion above under “The Orphan Drug Designation for Korlym may not provide protection from competition and other benefits as anticipated.” If another product for treatment of Cushing’s syndrome or Cushing’s disease is approved for commercialization, our potential future revenue could be reduced.

We will need to develop medical education, sales and marketing capabilities to successfully commercialize Korlym and our other proprietary, selective GR-II antagonists.

We currently have a limited number of employees with experience in marketing or selling pharmaceutical products. To achieve commercial success for any approved product, we must either develop sales and marketing capabilities internally or enter into arrangements with third parties to market and sell our current and future products, and we may not be successful in doing so. We are seeking to hire experienced medical science liaisons and other personnel to commercialize Korlym in the United States, which will be expensive and time consuming. Although we received approval to market and sell Korlym in February 2012, our efforts to staff, deploy and train a marketing and medical education organization remain in an early stage. Any failure or delay in the development or failure to maintain effectively our internal capabilities for the marketing and sales of Korlym would adversely impact the commercialization of the product. If our efforts to develop an internal commercial marketing and sales team are not successful, cost-effective and timely, we may not achieve profitability.

We will need to increase the size of our organization, and we may experience difficulties in managing growth.

We expect that the development of our commercial organization and the likely future expansion of our research and development efforts will strain our administrative, operational and management resources. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. To date, we have relied on a small management team, including a number of part-time contributors. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.

To that end, we must be able to:

 

   

integrate additional management, clinical development, administrative and sales and marketing personnel;

 

   

expand the size and composition of our management team;

 

   

develop our administrative, accounting and management information systems and controls;

 

   

hire and train additional qualified personnel;

 

   

manage our clinical trials effectively; and

 

   

manage our research and development efforts effectively.

We may not be able to accomplish these tasks, and our failure to accomplish any of them could harm our business.

Public perception of the active ingredient in Korlym, mifepristone (also known as “RU-486”), may limit our ability to market and sell Korlym.

The active ingredient in Korlym, mifepristone (RU-486), is approved by FDA in another drug for the termination of early pregnancy. As a result, mifepristone has been and continues to be the subject of considerable ethical and political debate in the United States and elsewhere. Public perception of mifepristone may limit our ability to engage alternative manufacturers and may limit the commercial acceptance of Korlym by patients and physicians. Even though we have taken measures to minimize the likelihood of the prescribing of Korlym to a pregnant woman, physicians may choose not to prescribe Korlym to a woman simply to avoid any risk of unintentionally terminating a pregnancy. We have taken measures to control the distribution of Korlym to reduce the potential for diversion and this controlled distribution may negatively impact sales of Korlym.

 

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We have no manufacturing capabilities and we currently depend on third parties to manufacture the active ingredient and the tablets for Korlym, both of which are single-source suppliers. If these suppliers are unable or unwilling to continue manufacturing Korlym and we are unable to contract quickly with alternative sources, or if these third-party manufacturers fail to comply with FDA regulations or otherwise fail to meet our requirements, our business will be harmed.

We currently have no experience in, and we do not own facilities for, nor do we plan to develop facilities for, manufacturing any products. We depend on third-party contract manufacturers to supply the active pharmaceutical ingredient, or API, in Korlym and to manufacture the Korlym tablet. In addition, we expect to use third-party manufacturers and suppliers if and when our product candidates are approved. The facilities used by our contract manufacturers to manufacture our products must be approved by the FDA pursuant to inspections. We do not control the manufacturing processes of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements, known as current good manufacturing practices, or cGMPs. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our products or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our products. In addition, sanctions could be imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our product candidates, delays, suspension or withdrawal of approvals, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could harm our business.

We have an agreement with only one approved manufacturer of the API in Korlym. This agreement is due to expire in November 2012 and we have initiated discussions about extension of the agreement. We have a memorandum of understanding with a second API manufacturer. However, there are no activities currently being conducted at this second manufacturer’s site to develop or qualify the manufacturing processes or facilities and we did not request approval of material produced by this second manufacturer when we submitted our NDA for Cushing’s syndrome.

We have an agreement with a tablet manufacturer that we included in our NDA submission for Korlym. This tablet manufacturer is a single-source supplier to us and has indicated that it will temporarily suspend commercial production in the fourth quarter of 2012 while it relocates to a new facility. However, we have a contract with a potential second tablet manufacturer to whom we have transferred the production process. This manufacturer has produced regulatory stability batches and established all required analytical testing methods. In June 2012, we submitted an NDA supplement to the FDA requesting this second tablet manufacturer’s approval as a source of Korlym tablets. The Prescription Drug User Fee Act due date for the FDA’s response is October 27, 2012. Nevertheless, we cannot give you any assurance as to the actual outcome or timing of the FDA’s review of this supplement or approval of this vendor as an alternate supplier. If we are unable to secure an alternate tablet supplier on a timely basis, and if our current single-source supplier were to fail to manufacture tablets on a timely basis in the quantities that we require, or fail to maintain manufacturing capabilities that meet FDA standards, we would likely experience a lengthy delay in our manufacturing processes. We cannot assure you that our single source-supplier or any alternate tablet supplier will be able or willing to meet our future demands.

Our current arrangements with these manufacturers are terminable by such manufacturers. If we are unable, for whatever reason, to obtain the API or Korlym tablets from our contract manufacturers, we may not be able to manufacture our required quantities or identify alternate manufacturers of mifepristone or Korlym tablets in a timely manner or on reasonable terms, if at all, which would harm our business.

 

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If we or others identify previously unknown, serious side effects of mifepristone, we may be required to perform lengthy additional clinical trials, change the labeling of Korlym or withdraw it from the market, any of which would hinder or preclude our ability to generate revenues.

The FDA’s approval of Korlym requires that we conduct a study of the interactions between Korlym and ketoconazole, an anti-fungal agent sometimes used to treat patients with Cushing’s syndrome. It also requires us to study drug utilization to better characterize the reporting rates of adverse events associated with the long-term use of Korlym. If we or others identify previously unknown, serious side effects of mifepristone:

 

   

regulatory authorities may withdraw their approvals;

 

   

we may be required to conduct additional clinical trials, make changes in labeling, implement changes to or obtain re-approvals of our manufacturing facilities;

 

   

we may experience a significant drop in the sales of Korlym;

 

   

our reputation in the marketplace may suffer; and

 

   

we may become the target of lawsuits, including class action lawsuits.

Any of these events could harm or prevent sales of the affected products or could increase the costs and expenses of commercializing and marketing Korlym.

We may have substantial exposure to product liability claims and may not have adequate insurance to cover those claims.

We may be subject to product liability or other claims based on allegations that the use of our products has resulted in adverse effects or that our product candidates are not effective, whether by participants in our clinical trials for Korlym or other product candidates, or by patients using Korlym. A product liability claim may damage our reputation by raising questions about Korlym or any of our product candidates’ safety or efficacy and could limit our ability to sell a product by preventing or interfering with product commercialization. In some cases, less common adverse effects of a pharmaceutical product are not known until long after the FDA approves the product for marketing. The active ingredient in Korlym is used to terminate pregnancy. Therefore, clinicians using the medicine in our clinical trials and physicians prescribing the medicine to women with childbearing potential must take necessary and strict precautions to ensure that the medicine is not administered to pregnant women. The failure to observe these precautions could result in significant product claims.

We have only limited product liability insurance coverage, with limits that we believe to be customary for a company beginning to commercialize its first pharmaceutical product. We intend to expand our product liability insurance coverage to any product candidates for which we obtain marketing approval. However, this insurance may be prohibitively expensive or may not fully cover our potential liabilities. Our inability to obtain adequate insurance coverage at an acceptable cost could prevent or inhibit the commercialization of Korlym or any of our product candidates, or result in meaningful underinsured or uninsured liability. Defending a lawsuit could be costly and significantly divert management’s attention from conducting our business. If a third party successfully sues us for any injury caused by our product candidates, our liability could exceed our total assets.

Even if we receive regulatory approval for our product candidates, we will be subject to ongoing and continued regulatory review, and if we are unable to maintain regulatory approval of Korlym, or if we fail to comply with regulatory requirements, we will be unable to generate revenue or may be subject to penalties and our business will be harmed.

Even after we obtain U.S. regulatory approval for a product, the FDA may still impose significant restrictions on the approved indicated uses for which the product may be marketed or on the conditions of approval. For example, a product’s approval may contain requirements for potentially costly post-approval studies and surveillance, including Phase 4 clinical trials, to monitor the safety and efficacy of the product. The FDA’s approval of Korlym was subject to limitations on the indicated uses for which the product may be marketed and requirements for post-marketing follow-up studies and information reporting. In addition, the FDA’s approval of Korlym requires that we conduct a study of the interactions between Korlym and ketoconazole, an anti-fungal agent sometimes used to treat patients with Cushing’s syndrome. It also requires us to conduct a drug utilization study to better characterize the reporting rates of adverse events associated with the long-term use of Korlym.

We will also be subject to ongoing obligations and continued regulatory review by the FDA and other regulatory authorities in the United States and other countries with respect to the research, testing, manufacturing, labeling, distribution, adverse event reporting, storage, selling, advertising, promotion, recordkeeping and marketing of products. These requirements include submissions of safety and other post-marketing information and reports, annual updates on manufacturing activities and continued compliance with cGMPs and cGCPs for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with FDA regulations and other applicable foreign and U.S. regulatory requirements may result in, among other things, warning letters, civil and criminal penalties, injunctions, holds on clinical trials, product seizure or detention, refusal to permit the import or export of products, restrictions on product marketing, withdrawal of the product from the market, voluntary or mandatory product recalls, total or partial suspension of production, refusal to approve pending NDAs or supplements to approved NDAs, and suspension or revocation of product approvals.

 

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The FDA’s policies may change and additional governmental regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may place at risk any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

The sale of our products is subject to regulatory approvals, and our business is subject to extensive regulatory requirements, and if we are unable to obtain regulatory approval for future product candidates, including mifepristone for the treatment of the psychotic features of psychotic depression, we will be limited in our ability to commercialize such product candidates and our business will be harmed.

We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates. Obtaining regulatory approval of a new drug is an uncertain, lengthy and expensive process, and success is never guaranteed. Despite the time, resources and effort expended, failure can occur at any stage. In order to receive approval from the FDA for each product candidate, we must demonstrate that the new drug product is safe and effective for its intended use and that our manufacturing processes for the product candidate comply with the FDA’s cGMPs. cGMPs include requirements related to production processes, quality control and assurance, and recordkeeping. The FDA has substantial discretion in the approval process for human medicines. The FDA may require substantial additional clinical testing or find our drug products do not satisfy the standards for approval. Our inability or the inability of our suppliers to comply with applicable FDA and other regulatory requirements can result in, among other things, delays in or denials of new product approvals, warning letters, fines, consent decrees restricting or suspending manufacturing operations, injunctions, civil penalties, recall or seizure of products, total or partial suspension of sales, and/or criminal prosecution. Any of these or other regulatory actions could materially adversely affect our business and our financial condition.

Future governmental action or changes in FDA law, policy or personnel may also result in delays or rejection of an NDA in the United States. In addition, because the only other currently FDA-approved use of mifepristone is the termination of pregnancy, we expect that the label for mifepristone for any indication, will include, as Korlym’s does, some limitations, including a so-called “black-box” warning that it should not be used by pregnant women or women seeking to become pregnant.

If we receive regulatory approval for our future product candidates, including mifepristone for the treatment of psychotic depression, we will be subject to ongoing FDA obligations and continued regulatory oversight and review, such as continued safety reporting requirements; and we may also be subject to additional FDA post-marketing restrictions and obligations, such as a Risk Evaluation and Mitigation Strategy. If we are not able to maintain regulatory compliance, we may not be permitted to market our product candidates and/or may be subject to product recalls or seizures.

Any regulatory approvals that we receive for our future product candidates may also be subject to limitations on the indicated uses for which the medicine may be marketed or contain requirements for potentially costly post-marketing follow-up studies. In addition, if the FDA approves any of our product candidates, we will be subject to ongoing and continuing regulatory requirements. See also the discussion above under “Even if we receive regulatory approval for our product candidates, we will be subject to ongoing and continued regulatory review, and if we are unable to maintain regulatory approval of Korlym, or if we fail to comply with regulatory requirements, we will be unable to generate revenue or may be subject to penalties and our business will be harmed.”

If we market products in a manner that violates FDA regulations or health care fraud and abuse laws, we may be subject to civil or criminal penalties.

In the United States, we are subject to FDA regulations governing the promotion of health care products. Although physicians are permitted, based on their medical judgment, to prescribe drugs for indications other than those approved by the FDA, manufacturers are prohibited from promoting their products for such “off-label” uses. In the United States, we will market Korlym for treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery and provide promotional materials and training programs to physicians regarding the use of Korlym for this indication. Although we believe our marketing materials and training programs for physicians do not constitute “off-label” promotion of Korlym, the FDA may disagree. If the FDA determines that our promotional materials, training or other activities by our employees or agents constitute “off-label” promotion of Korlym, it could request that we modify our training or promotional materials or other activities or subject us to regulatory enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties. It is also possible that other federal or state enforcement authorities might take action if they believe that the alleged improper promotion led to the submission and payment of claims for an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. Even if it is later determined that we are not in violation of these laws, we may be faced with negative publicity, incur significant expenses defending our position and have to divert significant management resources from other matters.

 

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In addition, there are health care fraud and abuse regulations and enforcement by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

 

   

the federal health care programs’ Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal health care programs such as the Medicare and Medicaid programs;

 

   

federal false claims laws, which prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Pharmaceutical companies have been prosecuted under these laws for a variety of promotional and marketing activities, such as allegedly providing free product to or entering into “sham” consulting arrangements with customers to induce such customers to purchase, order or recommend the company’s products in violation of the Anti-Kickback Statute and federal false claims laws and regulations; reporting to pricing services inflated average wholesale prices that were then used by certain governmental programs to set reimbursement rates; engaging in the promotion of “off-label” uses that caused customers to submit claims to and obtain reimbursement from governmental payors for non-covered “off-label” uses; and submitting inflated best price information to the Medicaid Drug Rebate Program;

 

   

the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which created federal criminal laws that prohibit executing a scheme to defraud any health care benefit program or making false statements relating to health care matters;

 

   

federal “sunshine” laws that require transparency regarding financial arrangements with health care providers, such as the reporting and disclosure requirements imposed by the PPACA on drug manufacturers regarding any “transfer of value” made or distributed to prescribers and other health care providers; and

 

   

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

Some states, such as California, Massachusetts and Vermont, mandate implementation of commercial compliance programs to ensure compliance with these laws.

The risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Moreover, recent health care reform legislation has strengthened these laws. For example, the PPACA, among other things, amended the intent requirement of the federal anti-kickback and criminal health care fraud statutes; a person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them. In addition, the PPACA provided that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims statutes. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from governmental health care programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical development is a long, expensive and uncertain process, and data obtained from clinical trials and supportive studies are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The results from early clinical trials may not be predictive of results to be obtained in later clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Clinical trials may not demonstrate sufficient safety and efficacy to obtain the necessary regulatory approvals or a commercially viable product. To gain regulatory approval from the FDA to market mifepristone for the psychotic features of psychotic depression, our ongoing phase 3 clinical trial must demonstrate the safety and efficacy of mifepristone for that indication. The ongoing phase 3 clinical trial of mifepristone for the treatment of the psychotic features of psychotic depression may not demonstrate efficacy or safety results sufficient for approval, and we may need to conduct other studies in support of a potential NDA in that indication. If our ongoing phase 3 clinical trial is not completed or conducted as planned or if mifepristone does not prove to be safe and effective or does not receive required regulatory approvals, the commercialization of mifepristone for the psychotic features of psychotic depression would be delayed or prevented, and our ability to generate revenues would be impaired.

 

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Moreover, the commencement and completion of clinical trials may be delayed by many factors that are beyond our control, including:

 

   

delays obtaining regulatory approval to commence a trial;

 

   

reaching agreement on acceptable terms with contract research organizations, or CROs, and clinical trial sites;

 

   

obtaining institutional review board, or IRB, approval at each site;

 

   

slower than anticipated patient enrollment;

 

   

scheduling conflicts with participating clinicians and clinical institutions;

 

   

lack of funding;

 

   

negative or inconclusive results;

 

   

patient noncompliance with the protocol;

 

   

adverse medical events or side effects among patients during the clinical trials;

 

   

negative or problematic FDA inspections of our clinical operations or manufacturing operations; and

 

   

real or perceived lack of effectiveness or safety of mifepristone.

We could encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the clinical trial sites in which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

We may decide, or the FDA or other regulatory authorities may require us, to pursue additional clinical or preclinical studies on mifepristone for the treatment of the psychotic features of psychotic depression. Additional trials or studies would require additional funding, the availability of which is not assured. Also, it is possible that additional trials or studies that we decide are necessary or desirable will delay or prevent the completion of the development of mifepristone for treating the psychotic features of psychotic depression. Even if we are able to conduct all of the clinical trials and supportive studies that we consider appropriate for an optimal NDA, we may never receive regulatory approval to market mifepristone for psychotic depression.

Our use of MedAvante to provide centralized psychiatric rating services in Study 14, our ongoing clinical trial evaluating mifepristone for the psychotic features of psychotic depression, may not result in any improvement in the accuracy and consistency of the psychiatric assessments and may continue to slow the pace of enrollment in Study 14.

In connection with our ongoing phase 3 trial evaluating mifepristone for the psychotic features of psychotic depression, Study 14, we engaged MedAvante to provide centralized psychiatric rating services. MedAvante is providing centralized psychometric assessments via high resolution video-conferencing. The use of MedAvante’s centralized rating services is intended to increase the accuracy and consistency of the psychiatric assessments.

MedAvante has provided similar centralized rating services to companies conducting clinical studies in various psychiatric disorders. However, they have not previously provided centralized rating services to any study in patients with psychotic depression. Although we and MedAvante conducted a small pilot evaluation in patients with psychotic depression to assess patient receptivity, we cannot be certain that centralized rating will be successful with the patients enrolled in our study.

 

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If patients are uncomfortable or unwilling to participate in the centralized rating process or if MedAvante is unable to provide services in a satisfactory manner over the course of the trial, we may not see any improvement in the accuracy or reliability of the psychiatric assessments. Such a result might diminish the likelihood of a successful trial or a definitive demonstration of the efficacy of mifepristone in treating the psychotic features of psychotic depression.

During screening for Study 14, there has been a higher than anticipated incidence of potential patients who do not meet appropriate criteria for entrance into the trial for diagnostic and other clinical reasons. Although we believe that this is the result of improved accuracy in the screening process resulting from the use of the MedAvante centralized rating services as an additional step in the selection of patients appropriate for inclusion in the study, MedAvante’s diagnostic screening may not actually improve trial performance. In addition, in mid-2009, in order to lower expenses and to conserve financial resources, we scaled back our planned rate of spending on this trial and extended the timeline for its completion. Our current plan is to increase the number of clinical sites from eight to approximately 20, which will increase our rate of spending on the trial, with an unknown effect on the likelihood of success.

We depend on third parties to conduct and manage many of our clinical trials and to perform related data collection and analysis and, if these third parties do not successfully carry out their contractual duties or meet expected timelines, we may face costs and delays that may prevent or delay us from obtaining regulatory approval for or commercializing our product candidates, which could substantially harm our business.

We rely on clinical investigators and clinical sites to enroll patients and other third parties such as clinical research organizations, or CROs, to manage many of our trials and to perform related data collection and analysis. We control only certain aspects of these third parties’ activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with current good clinical practices, or cGCP, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities through periodic inspections of trial sponsors, clinical investigators and clinical sites. If we or any of the third parties working on or conducting our trials fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approval of our marketing applications, if at all. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complies with cGCP requirements. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, we may not be able to control the timing of identification and selection of appropriate sites for our planned trials and the amount and timing of resources that the clinical sites that conduct the clinical testing may devote to our clinical trials. If our clinical investigators and clinical sites fail to enroll a sufficient number of patients in our clinical trials or fail to enroll them on our planned schedules, we will be unable to complete our trials or to complete them as planned, which could delay or prevent us from completing the clinical development of mifepristone for the psychotic features of psychotic depression or other development programs.

We have an agreement with a CRO that is conducting our ongoing phase 3 trial evaluating mifepristone for the treatment of the psychotic features of psychotic depression (Study 14) to supervise and monitor clinical site performance and to perform investigator supervision, data collection and analysis for this trial. The conduct of future clinical trials may also be conducted through the use of CROs and third party clinical sites. We may not be able to maintain relationships with this or other CROs or with the clinical investigators and the clinical sites through the completion of all trial activities without delays in anticipated timing of trial activities or excessive expenditures. If any of our relationships with CROs or other third parties terminates, we may not be able to enter into arrangements with alternative CROs or third parties on commercially reasonable terms, or at all. If these CROs, clinical investigators, clinical sites or other third parties do not carry out their contractual duties or obligations or fail to meet expected deadlines, or if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may be unable to obtain regulatory approval for, or successfully commercialize, mifepristone for the psychotic features of psychotic depression.

Failure to obtain regulatory approval in foreign jurisdictions will prevent us from commercializing Korlym and our other product candidates abroad.

We may seek to commercialize our products and product candidates in international markets with the help of one or more partners or on our own. Outside the United States, we may commercialize a product only if we receive a marketing authorization and, in many cases, pricing approval, from the appropriate regulatory authorities, whose approval processes include all of the risks associated with the FDA approval process, and, in some cases, additional risks. The approval procedure varies among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Other than seeking and receiving Orphan Drug Designation in the EU, we have not taken any actions to obtain foreign approvals. We may not develop our product candidates in the clinic in order to obtain foreign regulatory approvals on a timely basis, if at all.

 

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Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our product candidates in any foreign market.

The “fast track” designation for the development program of mifepristone for the treatment of the psychotic features of psychotic depression may not lead to a faster development or regulatory review or approval process.

If a human medicine is intended for the treatment of a serious or life-threatening condition and the medicine demonstrates the potential to address unmet medical needs for this condition, the sponsor of an IND may apply for FDA “fast track” designation for a particular indication. Marketing applications submitted by sponsors of product candidates in fast track development may qualify for expedited FDA review under the policies and procedures offered by the FDA, but the fast track designation does not assure any such qualification. Although we have obtained a fast track designation from the FDA for mifepristone for the treatment of the psychotic features of psychotic depression, we may not experience a faster development process, review or approval compared to applications considered for approval under conventional FDA procedures. In addition, the FDA may withdraw our fast track designation at any time. If we lose our fast track designation, the approval process may be delayed. In addition, our fast track designation does not guarantee that we will qualify for or be able to take advantage of the expedited review procedures and does not increase the likelihood that mifepristone will receive regulatory approval for the treatment of the psychotic features of psychotic depression.

We face competition from companies with substantial financial, technical and marketing resources, which could limit our future revenues from the commercialization of mifepristone for the treatment of the psychotic features of psychotic depression or for other indications.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. If approved for commercial use as a treatment for the psychotic features of psychotic depression, mifepristone will compete with established treatments, including ECT and combination medicinal therapy.

Combination medicinal therapy consists of the use of antipsychotic and antidepressant medicines not currently approved for the treatment of psychotic depression. The antipsychotics are prescribed by physicians for off-label use to treat the psychotic features of psychotic depression, which is the clinical target of mifepristone. Antipsychotics include Abilify ® (Bristol-Myers Squibb), Clozaril ® (Novartis), Geodon ® and Navane ® (Pfizer), Haldol ® (Ortho-McNeil), Mellaril ® (Mylan), Risperdal ® (Janssen Pharmaceuticals), Seroquel ® (AstraZeneca), Stelazine ® and Thorazine ® (GlaxoSmithKline) and Zyprexa ® (Eli Lilly). Mifepristone may not compete effectively with these established treatments. We are aware of one clinical trial conducted by Organon, for a new chemical entity for the treatment of psychotic depression. Organon was the pharmaceutical division of Akzo Nobel, which was purchased by Schering Plough which was then subsequently acquired by Merck & Co. Organon’s new chemical entity is a GR-II antagonist; we believe that its commercial use would be covered by our patent.

Our present and potential competitors include major pharmaceutical companies such as the makers of the drugs identified above, as well as specialized pharmaceutical firms, universities and public and private research institutions. Moreover, we expect competition to intensify as technical advances are made. These competitors, either alone or with collaborative parties, may succeed with the development and commercialization of medicinal products that are superior to and more cost-effective than mifepristone. Many of our competitors and related private and public research and academic institutions have greater experience, more financial and marketing resources and larger research and development staffs than we do. In addition, many of these competitors, either alone or together with their collaborative partners, have significantly greater experience than we do in developing human medicines, obtaining regulatory approvals, manufacturing and commercializing products.

Accordingly, mifepristone may not be an effective competitor against established treatments and our present or potential competitors may succeed in developing medicinal products that are superior to mifepristone or render mifepristone obsolete or non-competitive. If we are unable to establish mifepristone as a superior and cost-effective treatment for the psychotic features of psychotic depression, or any future use, we may be unable to generate the revenues necessary to support our business.

 

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Our efforts to discover, develop and commercialize new product candidates beyond mifepristone are at a very early stage. If we fail to identify and develop additional uses for GR-II antagonists, we may be unable to market additional products.

To develop additional potential sources of revenue, we believe that we must identify and develop additional product candidates. We own or have exclusively licensed issued U.S. patents covering the use of GR-II antagonists to treat psychotic depression, mild cognitive impairment, weight gain due to treatment with antipsychotic medication, stress disorders, early dementia, delirium, gastroesophageal reflux disease, Down’s Syndrome, catatonia and psychosis associated with cocaine addiction, and to increase the therapeutic response to electroconvulsive therapy (ECT). In addition, we have nine U.S. method-of-use patent applications covering GR-II antagonists for the treatment of a number of other metabolic and psychiatric disorders, three U.S. composition of matter patents covering specific GR-II antagonists, and a fourth pending U.S. composition of matter patent. We have also filed patent applications in the major international markets.

The use of GR-II antagonists may not be effective to treat these conditions or any other indications. Moreover, we could discover that the use of GR-II antagonists in these patient populations has unacceptable side effects or is otherwise not safe. Due to the risks of efficacy and side effects inherent in developing novel compounds, we are likely to enter multiple compounds into development, which would increase our rate of spending with no assurance that we will be successful in developing new drugs that are safe and effective.

In addition, we may not develop or continue to develop product candidates for any of the indications or compounds covered by our patents and patent applications. Typically, there is a high rate of attrition for product candidates in preclinical and clinical trials, and our product development efforts may not lead to commercially viable products.

We may elect to enter into collaboration arrangements with respect to one or more of our product candidates. If we do enter into such an arrangement, we would be dependent on a collaborative partner for the success of the product candidates developed under the arrangement. Any future collaborative partner may fail to successfully develop or commercialize a product candidate under a collaborative arrangement.

We only have significant clinical experience with mifepristone and we may determine that mifepristone is not desirable for uses other than for the treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery and the psychotic features of psychotic depression. For example, we do not intend to develop mifepristone for mitigation of the weight gain associated with the use of Zyprexa, Risperdal or other atypical antipsychotics, even though we have reported positive results in the proof of concept studies described in Part I, Item 1, Business – Overview – Mifepristone Proof-of-Concept Studies for Other Metabolic Disorders of our Annual Report on Form 10-K for the year ended December 31, 2011. We are pursuing other GR-II antagonists for this use. The compounds developed pursuant to our early clinical, preclinical and discovery research programs, including CORT 108297, may fail to become viable product candidates regardless of the resources we may dedicate to the program. Even if product candidates are identified, we may abandon further development efforts before we reach clinical trials or after expending significant expense and time conducting clinical trials due to financial constraints, concerns over the safety or efficacy of the product candidates, manufacturing difficulties or other reasons. Moreover, governmental authorities may enact new legislation or regulations that could limit or restrict our development efforts. If we are unable to successfully discover and commercialize new uses for GR-II antagonists, we may be unable to generate sufficient revenue to support our operations.

If we lose our key personnel or are unable to attract and retain additional skilled personnel, we may be unable to pursue our product development and commercialization efforts.

Our ability to operate successfully and manage our potential future growth depends significantly upon retaining key research, technical, sales, marketing, managerial and financial personnel, and attracting and retaining additional highly qualified personnel in these areas. We depend substantially on the principal members of our management and scientific staff. We do not have agreements with any of our executive officers that provide for their continued employment with us or employment insurance covering any of our key personnel. Any officer or employee can terminate his or her relationship with us at any time and work for one of our competitors. The loss of these key individuals could result in competitive harm because we could experience delays in our product research, development and commercialization efforts without their expertise.

We face intense competition for qualified personnel from numerous companies, as well as universities and nonprofit research organizations in the highly competitive San Francisco Bay Area. Although we believe that we have been successful in attracting and retaining qualified personnel to date, we may not be able to attract and retain sufficient qualified personnel in the future. The inability to attract and retain these personnel could result in delays in the research, development and commercialization of our potential products.

 

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Rapid technological change could make our product candidates obsolete.

Pharmaceutical technologies have undergone rapid and significant change and we expect that they will continue to do so. Our future will depend in large part on our ability to maintain a competitive position with respect to these technologies. Any products and processes that we develop may become obsolete or uneconomical before we recover any or all expenses incurred in connection with their development. Rapid technological change could make our product candidates obsolete or uneconomical, which could materially adversely affect our business, financial condition and results of operations.

The occurrence of a catastrophic disaster or other similar events could cause damage to our own or our manufacturers’ facilities and equipment, which could require us to cease or curtail operations.

Because our executive offices are located in the San Francisco Bay Area and some of our current manufacturers are also located in earthquake-prone areas, our business is vulnerable to damage from various types of disasters or other similarly disruptive events, including earthquake, fire, flood, power loss and communications failures. In addition, political considerations relating to mifepristone may put us and our manufacturers at increased risk for terrorist attacks, protests or other disruptive events. If any disaster or other similar event were to occur, we may not be able to operate our business and our manufacturers may not be able to produce our product candidates. Our insurance may not be adequate to cover, and our insurance policies may exclude coverage for, our losses resulting from disasters or other business interruptions.

Risks Related to Our Capital Needs and Financial Results

We may need additional capital in order to complete the development and commercialization of mifepristone and our other proprietary, selective GR-II antagonists. Additional capital may not be available to us at all or on favorable terms, which could adversely affect our business.

We may have to perform more clinical trials, in addition to our ongoing phase 3 trial, prior to submitting an NDA for mifepristone for the treatment of the psychotic features of psychotic depression. If so, we may need to raise additional funds to complete the development of mifepristone for that indication. In addition, we may need to raise additional funds to continue and expand the development of our proprietary, selective GR-II antagonists in various indications. We may also raise additional funds for other research and development activities, including clinical trials, and working capital and for other general corporate purposes, or to acquire or invest in businesses, products and technologies that are complementary to our own.

 

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Factors impacting our cash position and future prospects of liquidity include the following:

 

   

the amount and timing of revenues from the commercialization of Korlym;

 

   

the pace at which physicians adopt Korlym as a treatment;

 

   

the willingness of insurance companies, the government and other third-party payors to provide coverage for Korlym at reasonable rates;

 

   

changes in the reimbursement policies of third-party insurance companies or government agencies;

 

   

the costs, timing of site selection and enrollment of our clinical trials;

 

   

the results of our research efforts and clinical trials;

 

   

the need to perform additional clinical trials and other supportive studies;

 

   

the need to establish second sources for the manufacture of Korlym API and tablets;

 

   

the timing of the submission of an NDA to the FDA, the acceptance of the NDA submission, and the outcome of the FDA approval process for the marketing of mifepristone for the treatment of the psychotic features of psychotic depression;

 

   

the timing of commercialization of mifepristone for the treatment of psychotic depression;

 

   

developments or disputes concerning patents or proprietary rights, including announcements of claims of infringement, interference or litigation against us or our licensors;

 

   

actual or anticipated fluctuations in our operating results;

 

   

changes in our growth rates; and

 

   

changes in our research and development plans for our proprietary, selective GR-II antagonists.

Consequently, we may need additional funding sooner than anticipated. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current and future operating plans.

We cannot be certain that additional funding will be available on acceptable terms or at all. Even though we have raised funds a number of times in the past, market and economic conditions may make it difficult for us to raise any or sufficient additional capital. Our sales of common stock and warrants and the exercises of warrants have been dilutive to stockholders and any exercise of outstanding warrants and additional equity financing will cause further dilution to stockholders. Debt financing, if available, may involve restrictive covenants. If we obtain funds through collaborations with others, these arrangements may be on unfavorable terms or may require us to relinquish certain rights to Korlym, our technologies or product candidates, which we would otherwise seek to develop on our own. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our research or development programs or we may be required to discontinue operations.

We have incurred losses since inception and anticipate that we will incur continued losses for at least the next few years.

We have a limited history of operations and have focused primarily on clinical trials. We are beginning to commercialize Korlym and, if the outcome of our clinical trials supports it, we plan to seek FDA regulatory clearance to market mifepristone for the treatment of the psychotic features of psychotic depression. Historically, we have funded our operations primarily from the sale of our equity securities. We have incurred losses in each year since our inception in 1998. As of June 30, 2012, we had an accumulated deficit of $227.2 million. We only began to sell our first commercial product, Korlym, in the United States in April 2012. Based on this limited experience marketing Korlym, it is difficult for us to predict the magnitude or timing of future product sales. Subject to our ability to raise additional funds, we expect our research and development expenses to increase in connection with the clinical trials and other development activities for mifepristone for the psychotic features of psychotic depression and for other product candidates. We expect to incur significant expenses related to commercializing Korlym. As a result, we expect that our losses will increase at least until Korlym is generating material amounts of revenue. We are unable to predict the extent of any future losses or whether or when we will become profitable.

We may not be able to pursue all of our product research and development opportunities if we are unable to secure adequate funding for these programs.

The costs required to start or continue many of the programs that our intellectual property allows us to consider for further development are collectively greater than the funds currently available to us. For example, we have successfully discovered three series of compounds that are selective GR-II antagonists but, unlike mifepristone, do not appear to block the progesterone receptor. Further development of these proprietary compounds or any further development stemming from our method-of-use patents may be delayed or cancelled if we determine that such development may jeopardize our ability to complete the clinical development of mifepristone for the treatment of psychotic depression.

 

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Global economic conditions could adversely affect our liquidity and financial condition.

In the United States and globally, market and economic conditions have been volatile over the past few years, with significantly tighter credit conditions in the markets in which we conduct our operations. The U.S. and global economies have experienced a recession and face continued concerns about the systemic impact of adverse economic conditions, such as unstable global financial markets, adverse effects on the cost and availability of capital, high corporate, consumer and governmental debt levels and high unemployment. Concern about the stability of the markets generally, and the strength of counterparties specifically, has led and may again lead many lenders and institutional investors to reduce, and in some cases, cease, to provide credit to businesses. Renewed or increased turbulence in the global markets and economies may adversely affect our liquidity and financial condition.

In addition, our access to funds under any credit facility into which we may enter depends on the ability of the counterparties to such facilities to meet their funding commitments to us. We cannot assure you that long-term disruptions in the global economy and the return of tighter credit conditions among, and potential failures of, third party financial institutions as a result of such disruptions will not have an adverse effect on such counterparties.

If we do not have sufficient cash flow to continue operating our business and are unable to borrow funds or raise equity or debt capital, we may need to find alternative ways to increase our liquidity. Such alternatives may include, without limitation, curtailing clinical or drug development activity, or limiting our commercial efforts, product manufacturing or sales and marketing support, which would have an adverse effect on our business, results of operations, cash flows and financial condition.

If we acquire other GR-II antagonists or other technologies or potential products, we will incur a variety of costs and may never realize the anticipated benefits of the acquisition.

If appropriate opportunities become available, we may attempt to acquire other GR-II antagonists, particularly GR-II antagonists that do not terminate pregnancy. We may also be able to acquire other technologies or potential products that are complementary to our operating plan. We currently have no commitments, agreements or plans for any acquisitions. The process of acquiring rights to another GR-II antagonist or any other potential product or technology may result in unforeseen difficulties and expenditures and may absorb significant management attention that would otherwise be available for ongoing development of our business. In addition, we may fail to realize the anticipated benefits of any acquired potential product or technology. Future acquisitions could dilute our stockholders’ ownership interest in us and could cause us to incur debt, expose us to future liabilities and result in amortization or other expenses related to goodwill and other intangible assets.

Failure to meet our obligations under our Transaction with Biopharma Secured Debt Fund II Sub, S.àr.l, could adversely affect our financial results and liquidity.

Pursuant to our Transaction with Biopharma in August 2012, we are obligated to make payments to Biopharma equal to 20 percent of our net product sales of Korlym, any future mifepristone-based products and our next-generation selective GR-II antagonists (Covered Products), subject to certain quarterly caps, as well as an un-capped 20 percent of any upfront, milestone or other contingent payments we receive with respect to Covered Products, until such payments to Biopharma total $45 million.

Pursuant to this agreement, we may not: (i) incur indebtedness greater than the sum of Earnings Before Interest, Taxes, Depreciation and Amortization, including such items as non-cash stock-based compensation, (EBITDA) for the four calendar quarters preceding such incurrence (the Indebtedness Covenant); (ii) pay a dividend or other cash distribution, unless we have cash and cash equivalents in excess of $50 million after such payment; (iii) amend or restate our certificate of incorporation or bylaws unless such amendments or restatements do not affect Biopharma’s interests under the Transaction; and (iv) encumber any of the collateral securing our performance under the agreement.

The percentage used to calculate our payments to Biopharma would increase to 50 percent and any applicable payment caps would lapse if we (i) fail to provide Biopharma with certain information regarding our promotion and sales of Covered Products, (ii) do not devote a commercially reasonable amount of resources to the promotion and marketing of the Covered Products or (iii) violate the Indebtedness Covenant and, in each case, fail to cure within the applicable cure period.

 

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Upon a Corcept change of control transaction, as defined in the agreement, Biopharma will be automatically entitled to receive any amounts not previously paid, up to our maximum of $45 million repayment obligation. As defined in the agreement, “Change in Control” includes, among other things, (i) a greater than 50 percent change in the ownership or Board composition of Corcept and (ii) the licensing of Korlym to a third party for sale in the United States.

To secure our obligations under the agreement, we granted Biopharma a security interest in our rights in patents, trademarks, trade names, domain names, copyrights, know-how and regulatory approvals related to the Covered Products, all books and records relating to the foregoing and all proceeds of the foregoing. If we (i) fail to deliver a royalty payment when due and do not remedy that failure within 30 days, (ii) fail to maintain a first-priority perfected security interest in the Collateral in the United States and do not remedy that failure within five business days of receiving notice of such failure or (iii) become subject to an event of bankruptcy, then Biopharma may attempt to recover up to $45 million (after deducting any payments we have already made).

There can be no assurance that we will not breach the covenants or other terms of, or that an event of default will not occur under this agreement and, if a breach or event of default occurs, there can be no assurance that we will be able to cure the event within the time permitted. Any failure to pay our obligations when due, any breach or default of our covenants or other obligations, or any other event that causes an acceleration of payment at a time when we do not have sufficient resources to meet these obligations, could have a material adverse effect on our business, results of operations, financial condition and future viability.

The acceleration of the payment obligation in the event of a change of control transaction may make us less attractive to potential acquirers, and the payment of such funds out of our available cash or acquisition proceeds would reduce acquisition proceeds for our stockholders.

Risks Relating to Our Intellectual Property

If Korlym or future product candidates conflict with the patents of others or if we become involved in other intellectual property disputes, we may have to engage in costly litigation or obtain a license and we may be unable to commercialize our product candidates.

Our success depends in part on our ability to obtain and maintain adequate patent protection for the use of mifepristone for the treatment of the psychotic features of psychotic depression and other potential uses of GR-II antagonists. If we do not adequately protect our intellectual property, competitors may be able to use our intellectual property and erode our competitive advantage.

To date, we own ten issued U.S. method of use patents and have exclusively licensed three issued U.S. method of use patents. We have eight U.S. method-of-use patent applications pending for GR-II antagonists. We own three composition-of-matter patents and have one composition of matter patent application pending. We have applied, and will continue to apply, for patents covering our product candidates as we deem appropriate. We have also filed, where we deemed appropriate, foreign patent applications corresponding to our U.S. patents and applications.

We have exclusively licensed three issued U.S. patents from Stanford University for the use of GR-II antagonists in the treatment of psychotic major depression, which is commonly referred to as psychotic depression, cocaine-induced psychosis and early dementia, including early Alzheimer’s disease. We bear the costs of protecting and defending the rights to these patents. In order to maintain the exclusive license to these patents until their expiration, we are obligated to make milestone and royalty payments to Stanford University. If we become noncompliant with our obligations under this agreement, we may lose the right to commercialize mifepristone for the treatment of psychotic depression, cocaine-induced psychosis and early dementia and our business would be materially harmed. In addition, if Stanford University were to terminate our mifepristone license due to breach of the license on our part, we would not be able to commercialize mifepristone for the treatment of the psychotic features of psychotic depression, cocaine-induced psychosis or early dementia.

Our patent applications and patents licensed or issued to us may be challenged by third parties and our patent applications may not result in issued patents. For example, in 2004, Akzo Nobel, which was subsequently acquired by Schering Plough which was then subsequently acquired by Merck & Co., filed an observation challenging the claims of our exclusively licensed European patent application with claims directed to psychotic depression. In this instance, the patent later issued and, in 2007, we received notice from the European Patent Office that there will be no opposition proceedings in Europe in regard to this patent.

Our presently pending and future patent applications may not issue as patents, and any patent issued to us may be challenged, invalidated, held unenforceable or circumvented. For example, the arguments presented by Akzo Nobel could be raised in the United States either before the U.S. Patent and Trademark Office or in a court of law. Furthermore, the claims in patents which have been issued to us, or which may be issued to us in the future, may not be sufficiently broad to prevent third parties from producing competing products. In addition, the laws of various foreign countries in which we compete may not protect our intellectual property to the same extent as do the laws of the United States. If we fail to obtain adequate patent protection for our proprietary technology, our competitors may produce competing products based on our technology, which would impair our ability to compete.

 

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If a third party were successful in asserting an infringement claim against us, we could be forced to pay damages and prevented from developing, manufacturing or marketing our potential products. We do not have liability insurance for patent infringements. A third party could require us to obtain a license to continue to use their intellectual property, and we may not be able to do so on commercially acceptable terms, or at all. We believe that significant litigation will continue in our industry regarding patent and other intellectual property rights. If we become involved in litigation, it could consume a substantial portion of our resources. Regardless of the merit of any particular claim, defending a lawsuit takes significant time, is expensive and diverts management’s attention from other business.

If we are unable to protect our trade secrets and proprietary information, our ability to compete in the market could be diminished.

In addition to patents, we rely on a combination of confidentiality, nondisclosure and other contractual provisions, laws protecting trade secrets and security measures to protect our trade secrets and proprietary information. Nevertheless, these measures may not adequately protect our trade secrets or other proprietary information. If they do not adequately protect our rights, third parties could use our proprietary information, which could diminish our ability to compete in the market. In addition, employees, consultants and others who participate in the development of our product candidates may breach their agreements with us regarding our trade secrets and other proprietary information, and we may not have adequate remedies for the breach. We also realize that our trade secrets may become known through means not currently foreseen. Notwithstanding our efforts to protect our trade secrets and proprietary information, our competitors may independently develop similar or alternative products that are equal or superior to our product candidates without infringing on any of our proprietary information or trade secrets.

Our licensed patent covering the use of mifepristone to treat psychotic depression is a method of use patent rather than a composition of matter patent, which may make it more difficult for us to prove patent infringement if physicians prescribe another manufacturer’s mifepristone for the treatment of Cushing’s syndrome or psychotic depression or if patients acquire mifepristone from other sources, such as the internet or black market.

We have an exclusive license from Stanford University to a patent covering the use of GR-II antagonists, including mifepristone, for the treatment of psychotic depression. A method of use patent covers only a specified use of a particular compound, not a particular composition of matter. Because none of our issued patents covers the composition of mifepristone, we cannot prevent others from commercializing mifepristone in indications not covered by our method of use patents. If others receive approval to manufacture and market mifepristone or any other GR-II antagonist, physicians could prescribe mifepristone or any other GR-II antagonist for patients with psychotic depression instead of mifepristone. Although any such “off-label” use would violate our licensed patent, effectively monitoring compliance with our licensed patent may be difficult and costly. In addition, if others develop a treatment for the psychotic features of psychotic depression that works through a mechanism which does not involve the GR-II receptor, physicians could prescribe that treatment instead of mifepristone.

In addition, we cannot be assured that patients will not obtain mifepristone from other sources. As with other pharmaceutical products, patients may be able to purchase mifepristone through the internet or black market. Mifepristone is also sold in the United States by Danco Laboratories for the termination of early pregnancy. While distribution is limited to a single dose provided in the physician’s office and covered by other restrictions, we cannot be certain that Cushing’s syndrome patients will not be able to obtain mifepristone from this source or others, should another company receive approval to market mifepristone for another indication.

We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.

Despite the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. System failures, accidents or security breaches could cause interruptions in our operations, and could result in a material disruption of our clinical and commercialization activities and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of clinical trial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and our product research, development and commercialization efforts could be delayed.

 

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Risks Related to Our Stock

The market price of our common stock has been and is likely to continue to be highly volatile due to the limited number of shares of our common stock held by non-affiliates or factors influencing the stock market and opportunities for sale at any given time may be limited.

We cannot assure you that an active trading market for our common stock will exist at any time. Holders of our common stock may not be able to sell shares quickly or at the market price if trading in our common stock is not active. During the 52-week period ended August 1, 2012, our average daily trading volume was approximately 344,000 shares and the intra-day sales prices per share of our common stock on the NASDAQ Stock Market ranged from $2.50 to $4.90. As of August 1, 2012, our officers, directors and principal stockholders controlled approximately 35 percent of our common stock. The trading price of our common stock has been and is likely to continue to be highly volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including:

 

   

the pace of market acceptance of Korlym or the timing and level of reimbursement attained;

 

   

our cash and short-term investment position;

 

   

actual or anticipated timing and results of our clinical trials;

 

   

actual or anticipated regulatory approvals of our product candidates or of competing products;

 

   

changes in laws or regulations applicable to our product candidates or our competitors’ products;

 

   

changes in the expected or actual timing of our development programs or our competitors’ potential development programs;

 

   

actual or anticipated variations in quarterly operating results, including potential product returns and timing of revenue recognition;

 

   

announcements of technological innovations by us, our collaborators or our competitors;

 

   

new products or services introduced or announced by us or our competitors;

 

   

general market and economic conditions, including those seen as a result of the recent worldwide financial credit crisis;

 

   

changes in financial estimates or recommendations by securities analysts;

 

   

conditions or trends in the biotechnology and pharmaceutical industries;

 

   

changes in the market valuations of similar companies;

 

   

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 

   

additions or departures of key personnel;

 

   

disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

 

   

developments concerning collaborations;

 

   

trading volume of our common stock;

 

   

limited number of shares of our common stock held by our non-affiliates;

 

   

maintaining compliance with the listing requirements of the stock exchange on which we are listed;

 

   

success of additional financing efforts; and

 

   

purchases or sales of our common stock by us, our officers, directors or our stockholders.

In addition, the stock market in general, the NASDAQ Stock Market and the market for biotechnology and life sciences companies in particular have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources.

 

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The failure of our financial results to meet estimates published by research analysts or other investor expectations could cause our stock price to decline.

There are inherent difficulties in predicting the amount of Korlym that will be sold. For example, the rate of physician adoption of Korlym is uncertain. Furthermore, the timing of a single large order for Korlym could substantially affect our revenue, making our levels of revenue potentially volatile and the identification of revenue trends difficult. Due to such uncertainty, we have not provided any revenue forecasts to investors or research analysts. Research analysts who cover our business have, however, put forth a wide range of revenue estimates, based entirely on their own investigation and analysis. We have not guided or commented on these estimates and you should rely on them at your own discretion. Announcement of financial results that fail to meet analyst estimates or the expectations of investors could cause our stock price to decline.

Research analysts may not continue to provide or initiate coverage of our common stock or may issue negative reports, which may have a negative impact on our common stock’s market price.

Securities analysts currently covering our common stock may discontinue research coverage. Additional securities analysts may elect not to provide research coverage of our common stock. A lack of research coverage may adversely affect our common stock’s market price. The trading market for our common stock may be affected in part by the research and reports that industry or financial analysts publish about us or our business. If one or more of the analysts who elects to cover us downgrades our stock, our stock price would likely decline rapidly and significantly. If one or more of these analysts ceases coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline. In addition, rules mandated by the Sarbanes-Oxley Act of 2002, and a global settlement reached in 2003 between the SEC, other regulatory analysts and a number of investment banks have led to a number of fundamental changes in how analysts are reviewed and compensated. In particular, many investment banking firms are required to contract with independent financial analysts for their stock research. It may be difficult for companies such as ours with smaller market capitalizations to attract independent financial analysts that will cover our common stock. This could have a negative effect on our market price.

A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

Sales of a substantial number of shares of our common stock in the public market could harm the market price of our common stock. As additional shares of our common stock become available for resale in the public market, whether as a result of equity financings by us or due to the release of trading restrictions, the supply of our common stock will increase, which could decrease the price. Substantially all of the shares of our common stock are eligible for sale, subject to applicable volume and other resale restrictions.

We may be required to pay significant amounts if we are not able to meet our obligations under our outstanding registration rights agreements.

The registration rights agreement covering the approximately 8.9 million shares of our common stock issued in a private offering in March 2008 and an additional approximately 4.5 million shares of common stock underlying warrants issued in connection with the offering provides that if we fail to file or cause to be declared effective the registration statement covering the resale of these shares prior to specified deadlines, or fail to maintain the effectiveness of such registration statement (subject to limited permissible suspension periods), we will be required to pay the holders of such shares and warrants liquidated damages at the rate of 1 percent of the purchase price of these shares and warrants per month, up to a total of 10 percent. The registration statement covering the resale of the shares and shares underlying the warrants sold in this transaction was declared effective by the SEC in November 2008. Since this registration statement was not declared effective within the time frame specified in the registration rights agreement, we became obligated to pay liquidated damages of approximately $1.3 million in 2008 to the investors in this financing, which obligation was settled in the form of stock in lieu of cash in November 2008. As noted above, if we fail to maintain the effectiveness of this registration statement, we may be obligated to pay additional liquidated damage amounts in the future.

In addition, in March 2008, we entered into a CEFF with Kingsbridge, under which we granted to Kingsbridge a warrant for the purchase of 330,000 shares of common stock. Through June 30, 2012, we sold approximately 1.0 million shares of stock to Kingsbridge under the CEFF. As discussed in Note 8 of our financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we terminated our CEFF with Kingsbridge effective August 7, 2012 and no further securities will be sold thereunder. However, under the registration rights agreement issued in connection with the CEFF, we are required to continue to use commercially reasonable efforts to maintain the effectiveness of the registration statement covering the shares sold under this agreement and to be issued upon the exercise of the warrant for a period of up to two years following the termination of the CEFF, subject to earlier termination on certain events. During this period, if the effectiveness of the registration statement lapses through actions that were within our control, we may be obligated to pay Kingsbridge for all shares issued under the CEFF and still owned by Kingsbridge at any time during the period of ineffectiveness the difference between (a) the volume weighted average price as of the day prior to the period of ineffectiveness and (b) the volume weighted average price as of the day following the period of ineffectiveness.

If we are required to pay significant amounts under these or future registration rights agreements, it could have a material adverse effect on our financial condition and ability to finance our operations.

 

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Our officers, directors and principal stockholders, acting as a group, will be able to significantly influence corporate actions.

As of August 1, 2012, our officers, directors and principal stockholders control approximately 35 percent of our common stock. As a result, these stockholders, acting together, will be able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of this group of stockholders may not always coincide with our interests or the interests of other stockholders and may prevent or delay a change in control. This significant concentration of share ownership may adversely affect the trading price of our common stock because investors often perceive disadvantages to owning stock in companies with controlling stockholders.

Changes in laws and regulations may result in increased costs to us, which may harm our financial results.

New laws and regulations, as well as changes to existing laws and regulations, affecting public companies, including the provisions of the PPACA requiring the reporting of aggregate spending related to health care professionals, the provisions of Sarbanes-Oxley Act of 2002 and rules adopted by the SEC and by The Nasdaq Stock Market have and will likely continue to result in increased costs to us as we respond to their requirements. We are investing resources to comply with evolving laws and regulations, and this investment may result in increased selling, general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.

In addition, new rules and regulations could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, or our board committees, or as executive officers. At present, we cannot predict or estimate the amount of the additional costs related to new rules and regulations or the timing of such costs.

Compliance with public company obligations, including the securities laws and regulations, is costly and requires significant management resources, and we may fail to comply.

We are a small company with limited resources.

The federal securities laws and regulations, including the corporate governance and other requirements of the Sarbanes-Oxley Act of 2002, impose complex and continually changing regulatory requirements on our operations and reporting. These requirements impose comprehensive reporting and disclosure requirements, set stricter independence and financial expertise standards for audit committee members, and impose civil and criminal penalties for companies, their chief executive officers, principal financial officers and directors for securities law violations. These requirements have increased and will continue to increase our legal compliance costs, increase the difficulty and expense in obtaining director and officer liability insurance, and make it harder for us to attract and retain qualified members of our Board of Directors and/or qualified executive officers. Such developments could harm our results of operations and divert management’s attention from business operations.

In addition, as directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting in their annual reports on Form 10-K. This requirement first applied to our annual report on Form 10-K for the year ended December 31, 2007. This same legislation also requires that the independent registered public accounting firm auditing our financial statements must attest to and report on the effectiveness of our internal controls over financial reporting. This requirement first applied to our annual report on Form 10-K for the year ended December 31, 2010. Uncertainty exists regarding our ability to comply with these requirements by applicable deadlines and to maintain compliance in future years. If we are unable to complete the required assessment as to the adequacy of our internal control over financial reporting in future years or if our independent registered public accounting firm is unable to provide us with an unqualified report as to the effectiveness of our internal control over financial reporting as of future year ends, investors could lose confidence in the reliability of our financial reporting.

 

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Changes in or interpretations of accounting rules and regulations could result in unfavorable accounting charges or require us to change our accounting policies or operating practices.

Accounting methods and policies for business and marketing practices of pharmaceutical companies are subject to continual review, interpretation and guidance from relevant accounting authorities, including the SEC. For example, in December 2004, the Financial Accounting Standards Board adopted a revised standard related to stock-based compensation. This standard, which we adopted in 2006, requires the recording of expense for stock options granted using fair value-based measurements. As a result, our operating expenses have increased and are likely to continue to increase. We rely heavily on stock options to compensate existing employees and attract new employees. Because we are now required to expense stock options using fair value-based measurements, we may choose to reduce our reliance on stock options as a compensation tool. If we reduce our use of stock options, it may be more difficult for us to attract and retain qualified employees. Although we believe that our accounting practices are consistent with current accounting pronouncements, changes to or interpretations of accounting methods or policies in the future may require us to reclassify, restate or otherwise change or revise our financial statements. Any such changes could result in corresponding changes to the amounts of assets, liabilities, revenues, expenses and income. Any such changes could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

If we fail to continue to meet all applicable Nasdaq Stock Market requirements, our stock could be delisted by The Nasdaq Stock Market. If delisting occurs, it would adversely affect the market liquidity of our common stock and harm our business.

If we are unable to meet any of the Nasdaq listing requirements in the future, including, for example, if the closing bid price for our common stock is below $1 per share for 30 consecutive trading days, The Nasdaq Stock Market could determine to delist our common stock, the delisting could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease. Such delisting could also adversely affect our ability to obtain financing for the continuation of our operations and could result in the loss of confidence by investors, suppliers and employees.

Anti-takeover provisions in our charter and bylaws and under Delaware law may make an acquisition of us or a change in our management more difficult, even if an acquisition or a management change would be beneficial to our stockholders.

Provisions in our charter and bylaws may delay or prevent an acquisition of us or a change in our management. Some of these provisions allow us to issue preferred stock without any vote or further action by the stockholders, require advance notification of stockholder proposals and nominations of candidates for election as directors and prohibit stockholders from acting by written consent. In addition, a supermajority vote of stockholders is required to amend our bylaws. Our bylaws provide that special meetings of the stockholders may be called only by our Chairman, President or the Board of Directors and that the authorized number of directors may be changed only by resolution of the Board of Directors. These provisions may prevent or delay a change in our Board of Directors or our management, which is appointed by our Board of Directors. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law. Section 203 may prohibit large stockholders, in particular those owning 15 percent or more of our outstanding voting stock, from merging or combining with us. These provisions in our charter, bylaws and under Delaware law could reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than it would be without these provisions.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

 

ITEM 5. OTHER INFORMATION

None.

 

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ITEM 6. EXHIBITS

 

Exhibit
Number

  

Description of Document

3.1    Amended and Restated Certificate of Incorporation, as amended.
3.2    Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on
Form 8-K filed on September 27, 2007).
10.1 #    Commercial Outsourcing Services Agreement with Integrated Commercialization Solutions, Inc., dated as of April 14, 2011.
10.2 #    Amended and Restated Exclusive Pharmacy Product Purchase and Services Agreement with CuraScript, Inc., dated August 8, 2012.
10.3 #    Amended and Restated Exclusive Wholesale Product Purchase Agreement with CuraScript SD Specialty Distribution, dated August 8, 2012.
10.4    Corcept Therapeutics Incorporated 2012 Incentive Award Plan (incorporated by reference to Appendix A to the registrant’s Definitive Proxy Statement on Schedule 14A filed with the SEC on May 21, 2012).
31.1    Rule 13a-14(a)/15d-14(a) Certifications of Joseph K. Belanoff, M.D., Chief Executive Officer of the registrant.
31.2    Rule 13a-14(a)/15d-14(a) Certifications of G. Charles Robb, Chief Financial Officer of the registrant.
32.1    18 U.S.C. Section 1350 Certifications of Joseph K. Belanoff, M.D., Chief Executive Officer of the registrant.
32.2    18 U.S.C. Section 1350 Certifications of G. Charles Robb, Chief Financial Officer of the registrant.
101*    The following materials from the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) unaudited Condensed Balance Sheets at June 30, 2012 and December 31, 2011, (ii) unaudited Condensed Statements of Comprehensive Loss for the Three- and Six-Month Periods Ended June 30, 2012 and 2011, (iii) unaudited Condensed Statements of Cash Flows for the Six-Month Periods Ended June 30, 2012 and 2011, and (iv) Notes to Condensed Financial Statements.

 

#  

Confidential treatment requested

 

*  

Pursuant to Rule 406T of Regulation S-T, these XBRL data files are deemed furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

45


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

      CORCEPT THERAPEUTICS INCORPORATED
Date: August 9 2012      

/s/    Joseph K. Belanoff        

     

Joseph K. Belanoff, M.D.

Chief Executive Officer

Date: August 9, 2012      

/s/    G. Charles Robb        

     

G. Charles Robb

Chief Financial Officer

 

46


Table of Contents

Exhibit Index

 

Exhibit
Number

  

Description of Document

3.1    Amended and Restated Certificate of Incorporation, as amended.
3.2    Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on September 27, 2007).
10.1 #    Commercial Outsourcing Services Agreement with Integrated Commercialization Solutions, Inc., dated as of April 14, 2011.
10.2 #    Amended and Restated Exclusive Pharmacy Product Purchase and Services Agreement with CuraScript, Inc., dated August 8, 2012.
10.3 #    Amended and Restated Exclusive Wholesale Product Purchase Agreement with CuraScript SD Specialty Distribution, dated August 8, 2012.
10.4    Corcept Therapeutics Incorporated 2012 Incentive Award Plan (incorporated by reference to Appendix A to the registrant’s Definitive Proxy Statement on Schedule 14A filed with the SEC on May 21, 2012).
31.1    Rule 13a-14(a)/15d-14(a) Certifications of Joseph K. Belanoff, M.D., Chief Executive Officer of the registrant.
31.2    Rule 13a-14(a)/15d-14(a) Certifications of G. Charles Robb, Chief Financial Officer of the registrant.
32.1    18 U.S.C. Section 1350 Certifications of Joseph K. Belanoff, M.D., Chief Executive Officer of the registrant.
32.2    18 U.S.C. Section 1350 Certifications of G. Charles Robb, Chief Financial Officer of the registrant.
101*    The following materials from the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) unaudited Condensed Balance Sheets at June 30, 2012 and December 31, 2011, (ii) unaudited Condensed Statements of Comprehensive Loss for the Three- and Six-Month Periods Ended June 30, 2012 and 2011, (iii) unaudited Condensed Statements of Cash Flows for the Six-Month Periods Ended June 30, 2012 and 2011, and (iv) Notes to Condensed Financial Statements.

 

#  

Confidential treatment requested

 

*  

Pursuant to Rule 406T of Regulation S-T, these XBRL data files are deemed furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

47

EXHIBIT 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

CORCEPT THERAPEUTICS INCORPORATED

Corcept Therapeutics Incorporated, a corporation, organized and existing under the laws of the State of Delaware (the “ Corporation ”), hereby certifies as follows:

1. The original Certificate of Incorporation was filed with the Secretary of State of Delaware on May 13, 1998, and a Certificate of Designations, Preferences and Rights of Series A Preferred Stock was filed on May 26, 1999.

2. An Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on January 21, 2000.

3. A Certificate of Amendment of Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on June 29, 2000.

4. A Certificate of Amendment of Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on January 4, 2001.

5. An Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on May 7, 2001.

6. A Certificate of Amendment of Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on December 18, 2002.

7. The Amended and Restated Certificate of Incorporation in the form attached hereto as Exhibit A has been duly adopted in accordance with the provisions of Sections 242, 245 and 228 of the General Corporation Law of the State of Delaware by the directors and stockholders of the Corporation, and prompt written notice was duly given pursuant to Section 228 to those stockholders who did not approve the Amended and Restated Certificate of Incorporation by written consent.

8. The Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is hereby incorporated herein by this reference.


IN WITNESS WHEREOF, Corcept Therapeutics Incorporated has caused this Certificate to be signed by the Chief Executive Officer this 7 th day of April, 2004.

 

CORCEPT THERAPEUTICS INCORPORATED

By:

  /s/ Joseph Belanoff, M.D.
  Joseph Belanoff, M.D., Chief Executive Officer

 

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EXHIBIT A

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

CORCEPT THERAPEUTICS INCORPORATED

FIRST

The name of the Corporation is Corcept Therapeutics Incorporated.

SECOND

The address of the registered office of the Corporation in the State of Delaware is 615 South DuPont Highway, City of Dover, County of Kent, Delaware 19901. The name of its registered agent at such address is National Corporate Research, Ltd.

THIRD

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law.

FOURTH:

A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is One Hundred Fifty Million (150,000,000), consisting of One Hundred Forty Million (140,000,000) shares of Common Stock, par value $0.001 per share (the “Common Stock”) and Ten Million (10,000,000) shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”).

B. The board of directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in one or more series, and by filing a certificate pursuant to the applicable law of the State of Delaware (such certificate being hereinafter referred to as a “Preferred Stock Designation”), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation.

 

-3-


C. Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation (including any Certificate of Designations relating to any series of Preferred Stock).

FIFTH:

The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:

A. The business and affairs of the Corporation shall be managed by or under the direction of the board of directors. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

B. The directors of the Corporation need not be elected by written ballot unless the bylaws so provide.

C. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

D. Special meetings of stockholders of the Corporation may be called only by the Chairman of the Board or the President or by the board of directors acting pursuant to a resolution adopted by a majority of the Whole Board. For purposes of this Certificate of Incorporation, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.

 

-4-


SIXTH:

A. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the board of directors pursuant to a resolution adopted by a majority of the Whole Board. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified.

B. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the board of directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise required by law or by resolution of the board of directors, be filled only by a majority vote of the directors then in office, though less than a quorum (and not by stockholders), and directors so chosen shall serve for a term expiring at the next annual meeting of stockholders or until such director’s successor shall have been duly elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.

C. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the bylaws of the Corporation.

SEVENTH:

The board of directors is expressly empowered to adopt, amend or repeal the bylaws of the Corporation. Any adoption, amendment or repeal of the bylaws of the Corporation by the board of directors shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least Sixty Six and Two Thirds percent (66 2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend or repeal any provision of the bylaws of the Corporation.

 

-5-


EIGHTH:

A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

NINTH

The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation.

 

-6-


CERTIFICATE OF AMENDMENT

OF THE

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

CORCEPT THERAPEUTICS INCORPORATED

A DELAWARE CORPORATION

Corcept Therapeutics Incorporated, a corporation organized and existing under and by virtue of the laws of the State of Delaware (the “ Corporation ”), does hereby certify as follows:

FIRST: The name of the Corporation is Corcept Therapeutics Incorporated.

SECOND: The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on May 13, 1998.

THIRD: That, in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware (the “ DGCL ”), the Board of Directors of the Corporation (the “ Board ”) duly adopted resolutions setting forth a proposed amendment (this “ Amendment ”) to the Amended and Restated Certificate of Incorporation of the Corporation declaring this Amendment advisable and directing that the Amendment proposed be considered at the next annual meeting of the stockholders, among other things. The resolution setting forth the proposed amendment is as follows:

RESOLVED, that the Amended and Restated Certificate of Incorporation of the Corporation shall be amended by deleting the first sentence of Paragraph A of the Fourth Article thereof in its entirety and by substituting in lieu thereof the following:

“The total number of shares of all classes of stock which the Corporation shall have authority to issue is Two Hundred Ninety Million (290,000,000), consisting of Two Hundred Eighty Million (280,000,000) shares of common stock, par value $0.001 per share (the “Common Stock”), and Ten Million (10,000,000) shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”).”

FOURTH: That thereafter the annual meeting of stockholders of the Corporation was duly called and held, upon notice in accordance with Section 222 of the DGCL, at which meeting the necessary number of shares as required by the DGCL were voted in favor of this Amendment.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment of the Amended and Restated Certificate of Incorporation to be executed by a duly authorized officer thereof on this 14th day of June, 2012.

 

CORCEPT THERAPEUTICS INCORPORATED

By:

 

/s/ G. Charles Robb

Name: G. Charles Robb

Title: Chief Financial Officer

Exhibit 10.1

COMMERCIAL OUTSOURCING SERVICES AGREEMENT

This Commercial Outsourcing Services Agreement (“Agreement”) is entered into as of April 14, 2011 (the “Effective Date”) by INTEGRATED COMMERCIALIZATION SOLUTIONS, INC. , a California corporation (“ICS”) and Corcept Therapeutics, INC. , a Delaware corporation (the “Company”).

RECITALS

A. Company is, among other things, in the business of manufacturing, selling and distributing pharmaceutical products, including those listed on Schedule A (“Products”);

B. ICS is, among other things, in the business of providing commercialization services for pharmaceutical products;

C. The Company desires to engage ICS as its agent to provide certain commercialization services related to Products pursuant to this Agreement; and

D. ICS desires to provide such commercialization services to the Company as its agent pursuant to this Agreement.

AGREEMENT

NOW, THEREFORE, the parties hereby agree as follows:

 

1. Appointment As Exclusive Agent

The Company hereby appoints ICS as the exclusive provider of Services (as defined in Section 2) for Products sold to the Company’s customers (“Customers”) in the United States, Guam, Puerto Rico and the U.S. Territories during the Term (as defined in Section 4.1), as provided in this Agreement.

 

2. Services To Be Performed

2.1 Services . The Company hereby engages ICS to provide the following services with respect to Products (“Services”):

2.1.1 Customer Services as described in Exhibit B .

2.1.2 Warehousing and Inventory Program Services as described in Exhibit C .

2.1.3 Distribution Services as described in Exhibit D .

2.1.4 Warehousing and Distribution of Sample Products as described in Exhibit E .

2.1.5 Marketing Materials Fulfillment Services as described in Exhibit F .

2.1.6 Contract Administration and Chargeback Processing as described in Exhibit G .

2.1.7 Accounts Receivable Management and Cash Applications as described in Exhibit H .

2.1.8 Financial Management Services as described in Exhibit I .

2.1.9 Information Technology Services as described in Exhibit J .

 

Page 1

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.


2.2 ADR Status . Solely for the limited purpose of compliance with the pedigree requirements of the Prescription Drug Marketing Act and any similar state laws, ICS shall be considered an “Authorized Distributor of Record” for the Products and a third party logistics provider who does not take title to Product or have general responsibility to direct the Product’s sale or disposition. The foregoing shall not be construed in a manner that results in ICS being considered a distributor or wholesaler for any other purpose or under any other law or regulation.

2.3 Taxes . ICS will not be responsible for collection or payment of any Taxes on behalf of the Company.

2.4 Definitions . Capitalized words used without definition in this Agreement will each have the meaning in Schedule C Capitalized words used without definition in this Agreement will each have the meaning in Schedule C.

 

3. Compensation - Fees For Services

3.1 Compensation . The Company will compensate ICS for Services in accordance with Schedule B . ICS will provide monthly invoices for fees for Services to the Company, and will bill the Company for any pass through charges monthly or as ICS is billed. The Company will notify ICS of any disputed charges in writing within 30 days of the date of the invoice covering such charges. In the absence of any such notice of dispute, all invoices will be deemed to be correct and due in full within 30 days of the invoice date. If the Company disputes a portion of an invoice, the Company shall pay the undisputed portion of the invoice within 30 days of the invoice date. A late fee of [***] per month (or any portion thereof) will be charged as of the due date on all amounts not paid within [***] days of the invoice date, except any amount disputed by the Company in good faith. If any dispute is resolved in favor of ICS, the Company will pay the applicable late fee on such amount from the original due date.

3.2 Cost Adjustment . If ICS can reasonably demonstrate to the Company that the costs to ICS for providing Services have materially increased (or are reasonably likely to increase materially during the following twelve (12) month period of the Term) as a result of any changes to the contemplated distribution model (including a move to direct-to-physician or drop-ship model) or changes in the Requirements of Law, including the adoption of any new Requirements of Law impacting Services, then ICS may increase the applicable component of the fees for such Services provided in Schedule B (“Cost Adjustment”). ICS will notify the Company of any proposed Cost Adjustment at least [***] days prior to its effective date. All Cost Adjustments will be determined under generally accepted accounting principles (GAAP) and cost allocation methods applied on a consistent basis. If the Company objects to any Cost Adjustment and the parties are unable in good faith to resolve such objection to the reasonable satisfaction of both parties, then either party may terminate this Agreement upon [***] days’ prior written notice to the other party.

3.3 Program Ready Date . If the Company requests that ICS delay the launch of Services [***] days beyond the agreed-upon date on the signatory page (the “Program Launch Date”), the Company will pay ICS a program ready fee and any associated expenses as specified in Schedule B, including reasonable out-of-pocket costs and other expenses. The Company will give ICS at least [***] written notice of changes to the Program Launch Date. Program ready fees will continue until the Program Launch Date. After the Program Launch Date, the Company will pay applicable monthly program fees. For the first month during which Services are provided, ICS will prorate any difference between program ready fees and applicable monthly program fees.

 

Page 2

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


4. Term And Termination

4.1 Initial Term . This Agreement will be effective as of the Effective Date and will continue for three (3) years (the “Term”) unless sooner terminated in accordance with Section 4. The Term may be extended upon written mutual agreement of the parties, such extension to be negotiated in good faith six (6) months prior to the expiration of the Term.

4.2 Termination For Breach .

4.2.1 If a party fails to pay any amount due to the other party under this Agreement, the other party may provide notice to the non-paying party specifying the amount due and notifying the non-paying party that the other party may terminate this Agreement if the non-paying party fails to pay the amount due within [***] days of the date of the notice. If the non-paying party fails to pay the amount due within [***]days of the date of the notice, the other party may terminate this Agreement immediately and, in such event, shall provide written notice thereof to the non-paying party; provided that if such breach occurs more than [***] times during any [***] period, the non-breaching party may terminate this Agreement upon [***] days’ written notice without any opportunity for cure.

4.2.2 If a party fails to perform any other material obligation under this Agreement, the other party may provide notice to the breaching party describing the breach in detail and notifying the breaching party that the other party may terminate this Agreement if the breaching party’s failure to perform is not cured within [***]days of the date of the notice. If the breaching party’s failure to perform is not cured within [***] days of the date of the notice, then the other party may terminate this Agreement immediately and, in such event, shall provide written notice thereof to the breaching party; provided that (i) if the breaching party has begun to cure a non-monetary breach within such [***] days, but such cure is not completed within such [***] days, the breaching party will have a reasonable time to complete its cure if it diligently pursues the cure until completion, and (ii) if such breach occurs more than [***] times during any [***]period, the non-breaching party may terminate this Agreement upon [***] days’ written notice without any opportunity for cure.

4.3 Termination For Specific Events . Either party may immediately terminate this Agreement upon written notice to the other party upon the other party’s: (a) filing an application for or consenting to appointment of a trustee, receiver or custodian of its assets; (b) having an order for relief entered in Bankruptcy Code proceedings; (c) making a general assignment for the benefit of creditors; (d) having a trustee, receiver, or custodian of its assets appointed unless proceedings and the person appointed are dismissed within [***] days; (e) dissolving its existence under applicable state law; (f) insolvency within the meaning of Uniform Commercial Code Section 1-201 or failing generally to pay its debts as they become due within the meaning of Bankruptcy Code Section 303(h)(1), as amended; or (g) certification in writing of its inability to pay its debts as they become due (and either party may periodically require the other to certify its ability to pay its debts as they become due) (each, a “Bankruptcy Event”). Each party agrees to provide immediate notice to the other party upon a Bankruptcy Event.

4.4 Expenses . Within [***] days of expiration or earlier termination of this Agreement for any reason, the Company will (a) pay ICS any amount owed; (b) return to ICS all hardware, software and other equipment, or pay to ICS the replacement cost of items not returned; and (c) pay non-recoverable expenses for telecommunication, facsimile, postage, shipping and other services incurred by ICS up to the effective date of termination.

4.5 Survival . Accrued payment, indemnity and confidentiality obligations, and any provision if its context shows that the parties intended it to survive, will survive expiration or termination of this Agreement and, except as expressly provided, expiration or termination will not affect any obligations arising prior to the expiration or termination date.

 

Page 3

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


5. Recalls; Other FDA Issues

5.1 Recalls . If the Company conducts a recall, market withdrawal or field correction of any Products (“Recall”), the Company will conduct the Recall or designate a third party to do so and be responsible for all Recall expenses. ICS will comply with the Company’s reasonable requests in the Recall. If the Recall was not due primarily to ICS’s negligence, the Company will pay or reimburse ICS’s Recall expenses (including reasonable attorneys’ fees). If the Recall was due primarily to ICS’s negligence, ICS will pay or reimburse the Company’s reasonable documented out-of-pocket Recall expenses (including reasonable attorneys’ fees). Each party will use its best efforts to minimize Recall expenses. The Company will notify ICS of any proposed Recall as soon as possible and, in any event, will do so within [***] hours of initiating a Recall.

5.2 Government Notices . Each party will provide the other with a copy of any correspondence or notices it receives from the FDA, DEA or any counterpart state agency specifically relating to Services or relating to a material violation of any kind that is related to the Company or the Product, whether such violation resulted from an act or omission by the Company or by ICS, no later than [***] business days following such receipt. In addition, ICS will provide the Company with any notice relating to Products promptly upon its receipt. Furthermore to the extent the notice is related to the Product, Company will have right to provide input, which ICS will consider in good faith in formulating its response to the government agency. Each party will also provide the other with concurrent copies of any responses to any such correspondence or notices (e.g., such as an FDA 483 notice, warning letters, untitled regulatory letters and establishment inspection reports). Where reasonably possible, ICS will give prior notice to the Company of any scheduled FDA or DEA inspections of ICS’s facilities specifically relating to any Products, and, if reasonably possible, will afford the Company the opportunity to be present at such inspection and to review and contribute to any written response, to the extent permitted by law.

 

6. Legal Compliance

6.1 General . During the Term, each party will comply with all Requirements of Law. ICS will comply with Requirements of Law related to storage, handling and distribution of Products. The Company will comply with Requirements of Law related to importation, manufacture, distribution, labeling, storage, sale and handling of Products.

6.2 Other . The Company hereby represents and warrants to ICS that, during the Term (a) no Products delivered by or on behalf of the Company to or on the order of ICS will be, at the time of shipment or delivery, adulterated, misbranded or otherwise prohibited within the meaning of the Act or within the meaning of any applicable state or local law, (b) all Products will be, at the time of shipment and delivery to ICS, merchandise that may be introduced and delivered into interstate commerce under the provisions of Sections 404 or 405 of the Act, (c) all Products will be the subject of a duly approved NDA or ANDA and may be legally transported or sold under Requirements of Law, (d) all Products will have been approved by each applicable Governmental Authority for commercial sale and shipment within the United States and (e) the Company either (i) owns or holds the duly approved Biologics License Application, as such term is used in the Public Health Service Act, Title 21, United States Code, as amended, or the duly approved NDA or ANDA , for each of the Products, or (ii) is otherwise considered the “manufacturer” of all Products within the meaning of any applicable federal, state or local law relating to pedigrees.

 

Page 4

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


7. Representations And Warranties

7.1 By the Company . The Company represents and warrants to ICS that: (a) it has authority to enter into and perform this Agreement without restriction and this Agreement is a valid and binding obligation of the Company, (b) execution, delivery and performance of this Agreement by the Company has been duly authorized by all necessary corporate actions, (c) the Company has and will maintain, in full force and effect, all licenses and permits required under applicable law for the Company to sell and distribute Products under this Agreement, (d) as of the Program Launch Date, there is no proceeding or investigation pending or threatened that questions validity of this Agreement, marketing authorizations related to Products or actions pursuant to this Agreement, (e) Products, or any part thereof, have not been materially adversely affected in any way as a result of any legislative or regulatory change, revocation of the right to manufacture, distribute, handle, store, sell or market them or the Company’s breach of this Agreement, and (f) no approvals, consents, orders or authorizations of or designation, registration, declaration or filing with any Governmental authority (within the United States) are required for Company’s performance of its obligations under this Agreement, other than any approvals already obtained.

7.2 By ICS . ICS represents and warrants to the Company that: (a) it has authority to enter into and perform this Agreement without restriction and this Agreement is a valid and binding obligation of ICS, (b) execution, delivery and performance of this Agreement by ICS has been duly authorized by all necessary corporate actions, (c) ICS has and will maintain in full force and effect, all licenses and permits required under applicable law for ICS to perform the Services under this Agreement, (d) there is no proceeding or investigation pending or threatened that questions validity of this Agreement, ICS’s licenses to warehouse and distribute pharmaceuticals, or any actions pursuant to this Agreement, (e) Products have not been materially adversely affected while in ICS’s possession as a result of any revocation of its licenses or ICS’s breach of this Agreement, and (f) no approval of or filing with any Governmental Authority (within the United States) is required to perform Services, other than any approvals already obtained.

7.3 Notice of Changes . The Company and ICS will give prompt written notice to the other if it becomes aware during the Term of any action or development that would cause any warranty in this Section 7 to become untrue.

 

8. Trademarks/Data

Neither party may use the other party’s name, trademarks, service marks, logos, other similar marks, other intellectual property, or other data or information in any manner without its prior written approval, except to satisfy its obligations under this Agreement. Data and information that belong to the Company will be any data and information related to Products (including sales information), except “ICS Data.” ICS Data is data and information that is not specific to Products or the Company and was developed by ICS relating to its processes, reports and services provided to the Company under this Agreement. ICS Data, including information and data relating to any of ICS’s customers and their profiles, belongs to ICS.

 

9. Confidentiality

9.1 Existing Agreement . The parties have previously executed a written Confidentiality Agreement (“Confidentiality Agreement”), attached as Schedule E . The parties

 

Page 5


will abide by its provisions during the Term and for at least [***] years thereafter, regardless of any shorter term in the Confidentiality Agreement. Information disclosed under this Agreement and the terms and conditions of this Agreement (including all attachments) shall be deemed “Confidential Information” under the Confidentiality Agreement.

9.2 Termination . Upon expiration or termination of this Agreement for any reason each party will promptly: (a) return to the other party all documents and other material containing Confidential Information (as defined in the Confidentiality Agreement), including copies, other than those which a party is reasonably required to maintain for legal, tax or valid business purposes; or (b) certify to the other party that it has destroyed all such documentation and other materials.

 

10. Remedies

10.1 Generally . Rights and remedies under this Agreement are cumulative and in addition to any other available rights or remedies under any agreement, at law or in equity.

10.2 Equitable Relief . If either party violates or threatens to violate Recall, Legal Compliance, Trademark/Data infringement, Confidentiality or other provisions of this Agreement, the other party may suffer irreparable harm and its remedies at law may be inadequate. Accordingly, the other party may seek equitable relief.

10.3 Breach by the Company . The Company acknowledges the difficulty (if not the impossibility) of ascertaining the amount of damages that would be suffered by ICS if (i) the Company terminates this Agreement without cause or (ii) ICS terminates this Agreement following a breach by the Company. In such event, as compensation and not as a penalty, the early termination fee (the “ETF”) payable to ICS shall be equal to [***] of the aggregate amount of all fees and other sums that, in absence of such breach, would have been paid by the Company to ICS under this Agreement for the remaining months of the Term, with such fees and other sums to be based on the average monthly amount paid or owed by the Company to ICS during the [***] months preceding such breach (or such shorter time as the Agreement has been in effect). The ETF is in addition to any other claims or amounts owed by Company to ICS under this Agreement, including Fees for Services performed and costs incurred prior to the effective date of termination and indemnification obligations under this Agreement and the Continuing Guaranty and Indemnification Agreement referenced in Section 13 below (the “Continuing Guaranty”).

10.4 LIMITATIONS . EXCEPT FOR EACH PARTY’S OBLIGATIONS OF CONFIDENTIALITY UNDER SECTION 9, INDEMNIFICATION UNDER SECTIONS 11.1 AND 11.2, AND INTELLECTUAL PROPERTY UNDER SECTION 12:

(A) EXCEPT FOR ANY LIABILITY UNDER SECTION 10.3 ABOVE, NO PARTY WILL BE LIABLE TO ANY OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL OR OTHER SIMILAR DAMAGES ARISING OUT OF OR IN CONNECTION WITH A BREACH OF THIS AGREEMENT;

(B) ANY LOSS DUE TO DAMAGE OR LOSS OF PRODUCTS WILL BE BASED UPON THE COMPANY'S COST OF MANUFACTURING OR ACQUIRING PRODUCTS, NOT ITS SELLING COST; AND

(C) COMPANY UNDERSTANDS AND AGREES THAT IT HOLDS TITLE AND RISK OF LOSS FOR THE PRODUCTS AT THE ICS FACILITY UNDER THIS AGREEMENT. AS A SERVICE PROVICER, ICS DOES NOT ACCEPT LIABILITY FOR DAMAGE OR LOSS

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


TO THE PRODUCT WHILE IN THE ICS FACILITY, EXCEPT FOR LIABILITY FOR THIRD PARTY CLAIMS SUBJECT TO INDEMNIFICATION UNDER SECTION 11.2 BELOW. NOTWITHSTANDING THE FOREGOING, ICS AGREES THAT IF DAMAGE OR LOSS TO PRODUCTS IS CAUSED BY: (1) A BREACH OF THIS AGREEMENT BY ICS, ICS SHALL BE LIABLE FOR SUCH LOSS UP TO A MAXIMUM AMOUNT EQUAL TO THE ETF (AS DEFINED UNDER SECTION 10.3(C) ABOVE); OR (2) ICS’S GROSSLY NEGLIGENT OR WILLFUL ACT OR OMISSION, THEN NO LIMITATION OF LIABILITY SHALL APPLY, EXCEPT FOR THE LIMITATIONS OF SECTIONS 10.4(A) AND (B) ABOVE. COMPANY IS RESPONSIBLE FOR ENSURING THAT IT HAS APPROPRIATE INSURANCE IN PLACE TO PROTECT ITSELF FROM POTENTIAL DAMAGE OR LOSS TO ITS PRODUCTS. THE INSURANCE REQUIRED UNDER SECTION 13 BELOW IS A MINIMUM ONLY, AND ICS DOES NOT REPRESENT OR WARRANT THAT THESE COVERAGES ARE SUFFICIENT FOR COMPANY’S NEEDS.

 

11. Indemnification

11.1 By the Company . The Company will defend, indemnify and hold harmless ICS and its Related Parties from and against all claims, liabilities, losses, damages, costs and expenses, including reasonable attorneys’ fees (collectively, “Claims”) brought by third parties or the Company’s employees caused by or arising from any (a) negligent act or omission of the Company or its Related Parties, (b) failure of the Company to perform its obligations or to comply with Requirements of Law, (c) breach of any warranty made by the Company in this Agreement (d) claims of patent, trademark, copyright or other infringement related to Products, (e) storage, handling, use, non-use, demonstration, consumption, ingestion, digestion, manufacture, production and assembly of Products and their transportation to ICS, or (f) Taxes imposed against ICS or its Related Parties; provided , however, the Company will have no obligations under this Section 11.1 for any Claims to the extent caused by any negligent act or omission of ICS or its Related Parties.

11.2 By ICS . ICS will defend, indemnify and hold harmless the Company and its Related Parties from and against all Claims brought by third parties or ICS’s employees against the Company or its Related Parties caused by or arising from any (a) negligent act or omission of ICS or its Related Parties, (b) failure of ICS to perform its obligations or to comply with Requirements of Law, (c) breach of any warranty made by ICS in this Agreement, or (d) making by ICS of representations or warranties with respect to Products to the extent not authorized by the Company; provided , however, that ICS will have no obligations under this Section 11.2 for any Claims to the extent caused by any negligent act or omission of the Company or its Related Parties.

11.3 Procedures . The obligations and liabilities of the parties with respect to Claims subject to indemnification under this Section 11 (“Indemnified Claims”) will be subject to the following terms and conditions:

11.3.1 The party claiming a right to indemnification hereunder (“Indemnified Person”) will give prompt written notice to the indemnifying party (“Indemnifying Person”) of any Indemnified Claim, stating its nature, basis and amount, to the extent known. Each such notice will be accompanied by copies of all relevant documentation, including any summons, complaint or other pleading that may have been served or any written demand or other document.

11.3.2 With respect to any Indemnified Claim: (a) the Indemnifying Person will defend or settle the Indemnified Claim, subject to provisions of this subsection, (b) the Indemnified Person will, at the Indemnifying Person’s sole cost and expense, cooperate in the

 

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defense by providing access to witnesses and evidence available to it, (c) the Indemnified Person will have the right to participate in any defense at its own cost and expense to the extent that, in its judgment, the Indemnified Person may otherwise be prejudiced thereby, (d) the Indemnified Person will not settle, offer to settle or admit liability in any Indemnified Claim without the written consent of an officer of the Indemnifying Person, and (e) the Indemnifying Person will not settle, offer to settle or admit liability as to any Indemnified Claim in which it controls the defense if such settlement, offer or admission contains any admission of fault or guilt on the part of the Indemnified Person, or would impose any liability or other restriction or encumbrance on the Indemnified Person, without the written consent of an officer of the Indemnified Person.

11.3.3 Each party will cooperate with, and comply with all reasonable requests of, each other party and act in a reasonable and good faith manner to minimize the scope of any Indemnified Claim.

 

12. Intellectual Property

All concepts, inventions, ideas, patent rights, data, trademarks, and copyrights that are related to Products will remain exclusive property of the Company, except those not specific to Products and that relate to the general processes, reports and services developed by ICS and provided to the Company. Any concepts, inventions, ideas, patent rights, data, trademarks, and copyrights that are developed by ICS that are not specific to Products or that relate to the processes, reports and services developed by ICS will remain the exclusive property of ICS.

 

13. Insurance

13.1 By the Company . Within [***] days prior to product launch and for the remainder of the Term, the Company will maintain: (a) casualty and theft or loss insurance in amounts sufficient to protect all Products and other materials consigned to ICS, and (b) products liability and commercial general liability insurance having a limit of not less than [***] per occurrence, Combined Single Limit (Bodily Injury and Property Damage), pursuant to one or more insurance policies with reputable insurance carriers having a Best’s Rating of A VII or otherwise as reasonably approved by ICS. The Company will designate ICS and its Related Parties as “additional insureds” under each such insurance policy. The Company will obtain a broad form vendor’s endorsement for products liability for ICS and its Related Parties. Within [***] days prior to product launch, the Company will provide to ICS a certificate of insurance indicating that such obligations have been satisfied. As a condition precedent to the effectiveness of this Agreement, the Company will execute the form of Continuing Guaranty and Indemnification Agreement attached as Exhibit A .

13.2 By ICS . During the Term, ICS will maintain the following insurance:

13.2.1 Workers’ Compensation. Workers’ compensation statutory coverage as required by law in states where Services are performed;

13.2.2 Employer’s Liability. Employer’s liability insurance with a limit of [***] for bodily injury by accident per person, [***] for bodily injury by accident, all persons and [***] bodily injury by disease policy limit;

13.2.3 General Liability. Commercial general liability insurance, including personal injury blanket contractual liability and broad form property damage, with a [***] combined single limit;

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


13.2.4 Umbrella Liability. Umbrella liability insurance in the amount of [***] per occurrence and aggregate;

13.2.5 Property Insurance. Property insurance covering the business property of ICS and others while at any unnamed location in the amount of [***]; and

13.2.6 Other. ICS will not be obligated to insure Products against any loss or damage to Products arising from the shipment or storage of Products at the ICS Facility.

13.3 Self-Insurance , The insurance required by Section 13 may be made up through a combination of self-insured retention and traditional insurance.

13.4 Source of Recovery . Except to the extent that ICS is liable for Product damage or loss under Section 10.4(c) above, the Company agrees to look for recovery in respect of any such loss or damage solely to the casualty and theft or loss insurance provided by the Company in accordance with Section 13.1 of this Agreement.

13.5 Notice and Proof of Insurance . Throughout the Term, ICS will (a) provide prompt written notice to the Company in the event ICS becomes aware or is notified that the insurance described in Section 13.2 will be materially adversely modified or cancelled and (b) provide the Company with proof of such insurance.

 

14. Notices

Notices will be in writing and will be delivered personally (which will include delivery by courier or reputable overnight delivery service) or sent by certified mail, postage and fee prepaid, return receipt requested, to the address on the signature page. Items delivered personally will be deemed delivered on the date of actual delivery. Items sent by certified mail will be deemed delivered on the date the return receipt is signed. A party may change its contact information by a written notice delivered in accordance with this Section 14.

 

15. Governing Law

This Agreement and the rights and obligations of the parties under this Agreement will be construed and interpreted under the internal laws of the State of Texas, excluding its conflict and choice of law principles. The successful party in any legal action arising out of this Agreement, including enforcing its rights in a bankruptcy proceeding, may recover all costs, including reasonable attorneys’ fees.

 

16. Severability

If any court determines a provision of this Agreement is invalid, such holding will not affect the validity of other provisions and they will remain in effect.

 

17. Complete Agreement; Amendments; Counterparts; Waivers; Signatures.

This Agreement and its schedules and exhibits, including the Confidentiality Agreement and Continuing Guaranty, contain the entire agreement between the parties and supersede any prior oral and written representations by the parties that relate to the subject matter of this Agreement. This Agreement may not be amended, supplemented or waived in any respect without written agreement of both parties, signed by their respective authorized representatives. This Agreement may be executed in one or more counterparts, which will together constitute but one agreement and each of which will be an original. A party’s failure to insist, in one or more instances, upon performance of any provision of this Agreement will not be construed as a

 

Page 9


waiver of its right and the other party’s obligations will continue in full force. Either party’s consent to any act by the other party on any occasion will not be deemed consent on any other occasion. Facsimile transmissions bearing a party’s signature will for all purposes be deemed an original.

 

18. Force Majeure

If the performance of any part of this Agreement by any party will be affected for any length of time by fire or other casualty, government restrictions, war, terrorism, riots, strikes or labor disputes, lock out, transportation delays, electronic disruptions, internet, telecommunication or electrical system failures or interruptions, and acts of God, or any other cause which is beyond control of a party (financial inability excepted), such party will not be responsible for delay or failure of performance of this Agreement for such length of time, provided , however, (a) the affected party will cooperate with and comply with all reasonable requests of the non-affected party to facilitate Services to the extent possible, and (b) the obligation of one party to pay amounts due to any other party will not be subject to the provisions of this Section.

 

19. Interpretation

Each party to this Agreement (i) has participated in the preparation of this Agreement, (ii) has read and understands this Agreement, and (iii) has been represented by counsel of its own choice in the negotiation and preparation of this Agreement. Each party represents that this Agreement is executed voluntarily and should not be construed against a party solely because it drafted all or a portion of this Agreement. Headings of the various Sections are not part of the context of this Agreement, and are only labels to assist in locating those Sections, and will be ignored in construing this Agreement. When this Agreement requires approval of one or more parties, such approval may not be unreasonably withheld or delayed. Words, regardless of the number and gender specifically used, will be construed to include any other number, singular or plural, and any gender, masculine, feminine, or neuter, as the context requires. “And” includes “or.” “Or” is disjunctive but not necessarily exclusive. “Including” means “including but not limited to.”

 

20. Successors

The Company may not assign this Agreement or any of its rights or obligations without ICS’s prior written consent. Upon consent, this Agreement will be binding upon the successor party. Such consent shall not be unreasonably withheld.

 

21. Relationship Of The Parties

Neither party has any ownership interest in the other and their relationship, as established by this Agreement, is that of agent and master within the confines of the terms of this Agreement. Other than such limited agency, this Agreement does not create any partnership, joint venture or similar business relationship between the parties. Notwithstanding the limited agency created hereunder, each party will remain fully responsible for its actions and the actions of its Related Parties not specifically related to this Agreement.

22. Implementation Costs. Upon execution of this Agreement by the Company, the Company shall pay ICS half of the Implementation Fee on Schedule B ([***]). The Company shall pay the remaining half of the Implementation Fee [***] to ICS on the date on which ICS provides notice that it has achieved launch-ready status.

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


IN WITNESS WHEREOF, the parties have had a duly authorized officer, partner or principal execute this Commercial Outsourcing Services Agreement as of the Effective Date.

 

COMPANY: Corcept Therapeutics

 

    INTEGRATED COMMERCIALIZATION SOLUTIONS, INC.
By:  

/s/ Joseph K. Belanoff

    By:  

/s/ Doug Cook

Name:  

Joseph K. Belanoff

    Name:  

Doug Cook

Title:  

CEO

    Title:  

VP, General Manager

Address:  

149 Commonwealth Drive

Menlo Park, CA 9402

 

    Address:  

Attn: Executive Vice President and

General Manager

3101 Gaylord Parkway

Frisco, TX 75034

       

 

with a copy to:

 

AmerisourceBergen Specialty Group, Inc.

Attn: Group Counsel, 1N-E186

3101 Gaylord Parkway

Frisco, TX 75034

       

 

Program Launch Date: December 31, 2011

     
[If blank, the Program Launch Date will be 60 days after the Effective Date]     

 

Page 11


LIST OF SCHEDULES AND EXHIBITS

[Note: This list is to be revised in accordance with the actual Schedules and Exhibits used for each client agreement.]

 

Schedules:   
Schedule A    Description of Products
Schedule B    Summary of Fees
Schedule C    Additional Definitions
Schedule D    Example of Price Adjustment Calculation
Schedule E    Copy of Executed Confidentiality Agreement
Exhibits:   
Exhibit A    Continuing Guaranty and Indemnification Agreement
Exhibit B    Customer Services
Exhibit C    Warehousing and Inventory Program Services
Exhibit D    Distribution Services
Exhibit E    Warehousing and Distribution of Sample Products
Exhibit F    Marketing Materials Fulfillment Services
Exhibit G    Contract Administration and Chargeback Processing
Exhibit H    Accounts Receivable Management and Cash Applications
Exhibit I    Financial Management Services
Exhibit J    IT Services

 

Page 12


SCHEDULE A

DESCRIPTION OF PRODUCTS

 

Description

  

NDC Number

Corlux    TBD
Samples   
Free Goods   

 

Page 13


SCHEDULE B

SUMMARY OF FEES

 

Fee

 

Amount

  

Description

3PL Services
Development and Implementation   [***]   

•   Hiring and training of staff

 

•   ERP system set up

 

•   Project management time for implementation

 

•    Data interface design and testing **Should data file transfer custom development be required, additional fees will apply at the per hour rate

 

•   Corcept-specific telecommunications set up

 

•   Creation of a Corcept-specific DataMart and RealTime Web Portal

 

•   852/867 Service Support set up

 

•   If a website is developed for ordering marketing materials, there will be an additional one-time fee of $10,000

Stand-Ready Fee   [***]month    Monthly fee assessed if Program Launch Date is delayed.
Monthly Management Fee
Customer Service   [***]   

•   Address customer inquiries as Corcept

Warehouse & Distribution     

•   Manage Customer Relationship

Returns Management   [***]   

•   Account Set Up

Finance   [***]   

•   License Verification

 

Information Technology & Reporting

 

Chargeback Management

 

Sample Management

 

Marketing Material Management

  [***]   

•   Order Processing

 

•   Sample Order Processing

 

•   Marketing Material Order Processing

 

•   Returns

 

•   Product Inquiries

 

•   Inventory pick, pack and ship from ICS distribution center

 

•   Corcept-Branded Packing Slips

 

•   Daily Cycle Counts

 

•   One Physical Inventory Count per annum

 

•   Inventory Management

 

•   Invoicing as Corcept

 

•   Establish Credit Limits

 

•   Process Returns

 

•   Call Triage

 

•   Accounts Receivable Management

 

•   Collections

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


Fee

 

Amount

  

Description

    

•   Debit memo processing

 

•   Reconciliation reporting

 

•   Chargeback processing and System Maintenance

 

•   Maintenance of Corcept specific DataMart and web reporting tool

 

•   Maintenance of Business Objects for web reporting

 

•   Future upgrades to ICS’ software

 

•   Includes two licenses to Business Objects reporting tool

Customer Service Fees

Order Processing Fee  

[***]

 

[***]

 

[***]

  

Order is defined as a shipment to a unique address that leaves the distribution center, regardless of the number of cartons or packages that constitute that shipment and/or the number of inbound requests for said Order.

 

Electronic orders are those that are imported into the system automatically without manual intervention from customer service.

Customer Setup Fee   [***]    Assessed for every new account setup completed for an authorized Corcept customer. This includes license receipt and verification after initial launch setup.
Account Maintenance/ License Updates   [***]    Fee to perform any type of account update or to update license on account.
Drop Shipment Surcharge   [***]    Assessed in addition to Per Order fees outlined above, when drop shipments are requested. Drop Shipments are defined as shipments that are shipped directly to an end customer of the wholesaler, and invoiced directly to the wholesaler.
Allocation Fee   [***]    Order allocations encompass any inbound orders to ICS that needs to have original conditions revised and/or altered (i.e. manual intervention) as opposed to allowing the order to automatically flow through the order process system. An example of an allocation would be a backorder situation.
Rush Order   [***]    Orders that are received and processed between 3:00 p.m. and 5:00 p.m. ET, at the request of the Corcept.
Emergency Order   [***]    Emergency shipments are defined as any order received outside of scheduled working hours (currently M-F 8:00 a.m. to 5:00 p.m. ET) requiring ICS staff to return to the ICS facility to process the order within the same day.
International Order   [***]    Fee applied in addition to any order processing fees.

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


Fee

 

Amount

  

Description

Warehouse & Distribution Fees
Product Storage   [***]    Monthly fee for controlled temperature pallet storage.

Order Processing Fees

 

Ambient Trade Product

 

[***]

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

  

Order is defined as a shipment to a unique address that leaves the distribution center, regardless of the number of cartons or packages that constitute that shipment and/or the number of inbound requests for said Order.

 

Line is defined as each SKU or product line picked on the order.

Unit is defined as each unit of measure picked on the order.

Sample/Marketing Distribution

 

Ambient

 

[***]

 

[***]

 

[***]

  

Order is defined as a shipment to a unique address that leaves the distribution center, regardless of the number of cartons or packages that constitute that shipment and/or the number of inbound requests for said Order.

 

Line is defined as each SKU or product line picked on the order.

Pick is defined as each unit of measure picked on the order.

Receiving Fee   [***]    Fee assessed each pallet received into the warehouse.
Shipping Fee   [***]    Fee assessed each pallet shipped from the warehouse.
Bulk Shipments   [***]    Fee for LTL shipments; replaces smaller shipper fees below.
Packing Supplies   [***]    Any packing materials that ICS must provide for the Corcept to ship Commercial and Non-Commercial Products.
Freight   [***]    ICS will share AmerisourceBergen Corporation (ABC) discounted rates with Corcept with a mark-up of 10%.
Finance
Invoice Processing   [***]    Fee for sending invoice (electronic or paper) to customer, collection efforts and cash posting.
Credit/Rebill Transactions   [***]    Any Corcept requested credit or rebill transactions keyed in the system.
Credit Verification Reports – Dun & Bradstreet   [***]    Any Corcept requested credit report. Dun & Bradstreet (D&B) typically tracks information for corporate customers.
Credit Verification Reports – Experian   [***]    Any Corcept requested credit report. Experian typically tracks information for individual customers such as physicians.

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


Fee

 

Amount

  

Description

Returns Management
RGA Initiation  

[***]

 

[***]

  

RGA: Returned Goods Authorization.

 

Fee for processing return request from customer and sending the customer an RGA.

Return Processing   [***]    Receipt of physical return at the distribution center. Fee includes itemizing contents of the return
Partial Return Processing   [***]    Fee applied in addition to Return Processing fee for handling and counting partial containers.
Returns Storage   [***]    Monthly fee for controlled room temperature pallet storage.
Contract and Chargeback Management
Chargeback Processing – Manual   [***]    Each SKU is considered a line. If customers cannot send information electronically, they will mail information for manual processing. ICS and Customer must have copies of contracts in order to process chargebacks without manual intervention.
Chargeback Processing – Electronic   [***]    Each SKU is considered a line. Customers will typically send chargebacks electronically according to HDMA standards.
Membership Additions   [***]    Fee to add members to an account.
Contract Setup   [***]    Fee to add new contract to client account.
Contract Updates   [***]    Fee assessed any time an account requires a change or update to an existing contract.
Information Technology and Reporting
852/867: ABC, CAH, MCK   [***]    Maintenance and mapping of the 852 and 867 reporting.
Custom Reports   [***]    Fee for reports created that are not part of the standard reports provided by ICS. Hourly report creation fees assessed for initial report creation but not thereafter for running the same report.
Custom Development Services   [***]    Fee for customized processes developed at the request of Corcept. Hourly fees will be assessed and approved by Corcept before development work is to begin.
Additional Fees
Product Destruction   [***]    Destruction of product per Corcept request and instruction.
FedEx/UPS/Postage Expenses   [***]    Freight expenses for shipments of documents or any other shipments related to daily operations on behalf of Corcept.

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


Fee

 

Amount

  

Description

Pre-Approved Assessorial Labor Charge – Warehouse   [***]    This fee will be assessed for work that is completed outside the scope of the agreed upon services outlined in the Services Agreement. Corcept must provide prior approval before assessorial labor takes place.
Pre-Approved Assessorial Labor Charge – Office Staff   [***]    This fee will be assessed for work that is completed outside the scope of the agreed upon services outlined in the Services Agreement. Corcept must provide prior approval before assessorial labor takes place.
Pre-Approved Assessorial Labor Charge – QC, Management   [***]    This fee will be assessed for work that is completed outside the scope of the agreed upon services outlined in the Services Agreement. Corcept must provide prior approval before assessorial labor takes place.
ICS Travel   [***]    This is for Corcept requested travel. Corcept must provide prior approval before travel takes place.

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


SCHEDULE C

ADDITIONAL DEFINITIONS

Act ” means the Federal Food, Drug and Cosmetic Act, Title 21, United States Code, as amended, and the regulations promulgated thereunder.

ANDA ” means an Abbreviated New Drug Application as defined in and contemplated by the Act.

Customer ” is defined in Agreement Section 1.

DEA ” means the United States Drug Enforcement Administration.

FDA ” means the United States Food and Drug Administration.

Governmental Authority ” means any nation, government, state or other political subdivision, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

ICS Facility” means the facility located at 420 International Blvd. Suite#500, Brooks, KY 40109 or 5360 Capital Court #102, Reno, NV 89502.

NDA ” means a New Drug Application as defined in and contemplated by the Act.

Person ” means any corporation, natural person, the Company, entity, firm, joint venture, partnership, trust, unincorporated organization, or Government Authority.

Products ” is defined in Agreement Recital A.

Related Parties ” means the subsidiaries, parents, affiliated companies, officers, directors, employees, independent contractors, representatives, shareholders, trustees and agents of any Person.

Requirements of Law ” means any law (including consumer law), treaty, rule or regulation or a final and binding determination of a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

Services ” is defined in Agreement Section 2.1.

Taxes ” means any and all liabilities, losses, expenses, and costs of any kind whatsoever that are, or are in the nature of taxes, fees, assessments, or other governmental charges, including interest, penalties, fines and additions to tax imposed by any federal, state or local government or taxing authority in the United States on or with respect to: (a) the Agreement or any related agreements or any future amendment, supplement, waiver, or consent requested by the Company or any required by the Agreement with respect to the execution, delivery or performance of any thereof, or the issuance, acquisition or subsequent transfer thereof, (b) the return, acquisition, transfer of title, storage, removal, replacement, substitution, purchase, acceptance, possession, rejection, ownership, delivery, non-delivery, use, operation, sale, abandonment, redelivery or other disposition of any interest in Products or any part thereof, (c) the receipts or earnings arising from any interest in Products or any part thereof, (d) any

 

Page 19


payment made pursuant to this Agreement or to any Products, or (e) otherwise as a result of or by reason of the transactions contemplated by this Agreement, excluding, however, taxes imposed upon ICS that are based upon or measured by gross or net income and any franchise Taxes of ICS or any personal property taxes for Products or equipment owned by ICS.

Term ” is defined in Agreement Section 4.1.

 

Page 20


SCHEDULE D

COPY OF EXECUTED CONFIDENTIALITY AGREEMENT

MUTUAL NON-DISCLOSURE AGREEMENT

This Mutual Non-Disclosure Agreement is made as of March 22, 2011 (“the Effective Date) between AmerisourceBergen Specialty Group, Inc., with offices at 3101 Gaylord Parkway, Frisco, TX 75034 and Corcept Therapeutics, Inc., with offices at 149 Commonwealth Drive, Menlo Park, CA 94025.

Background

The parties are interested in evaluating a potential venture relating to warehousing, distribution and other commercial services (the “Venture”). In order to facilitate such evaluation, either party (“Disclosing Party”) may disclose to the other party (“Recipient”) certain of its confidential or proprietary information.

1. Definition of Confidential Information . “Confidential Information” means any confidential or proprietary information that is disclosed or made available by Disclosing Party to Recipient, whether in writing or other tangible form, orally or otherwise. Confidential Information includes (a) information about processes, systems, strategic plans, business plans, operating data, financial information and other information and (b) any analysis, compilation, study or other material prepared by Recipient (regardless of the form in which it is maintained) that contains or otherwise reflects any information disclosed or made available by Disclosing Party to Recipient.

2. Exclusions from Confidential Information . Confidential Information does not include information that:

(a) at the time of disclosure to Recipient, is generally available to the public;

(b) after disclosure to Recipient, becomes generally available to the public other than as a result of a breach of these provisions by Recipient (including any of its affiliates);

(c) Recipient can establish was already in its possession at the time the information was received from Disclosing Party if its source was not known by Recipient to be bound to an obligation of confidentiality with respect to such information;

(d) Recipient receives from a third party if its source was not known by Recipient to be bound to an obligation of confidentiality with respect to such information; or

(e) Recipient can establish was developed independently by Recipient without use, directly or indirectly, of any Confidential Information.

3. Limitations on Disclosure and Use . Confidential Information must be kept strictly confidential and may not be disclosed or used by Recipient except as specifically permitted by this Agreement or as specifically authorized in advance in writing by Disclosing Party. Recipient may not take any action that causes Confidential Information to lose its confidential and proprietary nature or fail to take any reasonable action necessary to prevent any Confidential Information from losing its confidential and proprietary nature. Recipient will limit access to Confidential Information to its employees, officers, directors or other authorized representatives (or those of its affiliates) who (a) need to know such Confidential Information to participate in evaluating the Venture and (b) are obligated to

 

Page 21


Recipient to maintain Confidential Information under terms and conditions at least as stringent as those under this Agreement. Recipient will inform all such persons of the confidential and proprietary nature of Confidential Information and will take all reasonable steps to ensure they do not breach their confidentiality obligations, including taking any steps Recipient would take to protect its own similarly confidential information. Recipient will be responsible for any breach of confidentiality obligations by such persons.

4. Ownership . All Confidential Information and deviations of Confidential Information will remain the sole and exclusive property of Disclosing Party and, except as provided, no license or other right to it will be implied by this Agreement. If Recipient has prepared any analysis, compilation, study or other material (regardless of form) that contains or otherwise reflects any Confidential Information, then such material will be owned solely by Disclosing Party and treated as its Confidential Information under this Agreement.

5. No Representations or Warranties . Recipient acknowledges that Disclosing Party makes no representations of warranties, express or implied, as to the accuracy or completeness of Confidential Information and Recipient agrees that Disclosing Party will have no liability for any errors or omissions in such information.

6. Return or Destruction of Confidential Information . Upon Disclosing Party’s request, Recipient will promptly deliver to Disclosing Party or destroy all Confidential Information (including material that contains or otherwise reflects Confidential Information) in its custody or control and will deliver it to Disclosing Party within ten (10) business days after such request or deliver a written statement from a corporate officer certifying it has destroyed all of Disclosing Party’s Confidential Information. Unless authorized in writing by Disclosing Party Recipient will not retain any copy, extract or summary of Confidential Information (including material that contains or otherwise reflects Confidential Information). The obligation to destroy or return shall not apply to Confidential Information that is stored on back-up tapes and similar media that are not readily accessible to Recipient.

7. Equitable Relief . Each party acknowledges that, when it is Recipient, money damages would not be a sufficient remedy for Disclosing Party in the event of any breach of these provisions and that Disclosing Party is entitled to seek specific performance and injunctive or other equitable relief as a remedy for any such breach. Recipient further agrees to waive any requirement for the posting of any bond in connection with any such remedy. Such remedy will be in addition to any other available remedies at law or in equity.

8. Disclosures Required by Law . If Recipient is required by law to disclose any Confidential Information, Recipient will give Disclosing Party prompt notice and will use all reasonable means to obtain confidential treatment for any Confidential Information that it is required disclose before making any such disclosure. If Recipient cannot assure confidential treatment and it has exhausted all reasonable efforts to do so, Recipient may disclose Confidential Information to the extent it is required by law to disclose the information it discloses. Notwithstanding the foregoing, Disclosing Party may request Recipient to take additional steps to seek confidential treatment before Recipient discloses Confidential Information even though Recipient has otherwise exhausted all reasonable efforts to do so. In such event, Recipient will undertake such additional steps at Disclosing Party’s expense.

9. Term of this Agreement . This Agreement covers Confidential Information that is disclosed by Disclosing Party to Recipient until the first anniversary of the Effective Date. Recipient’s obligation to protect Confidential Information disclosed during such one-year period expires three years from the Effective Date.

 

Page 22


10. Subsequent Agreement . If the patties pursue the Venture, they anticipate entering into a definitive agreement that will set forth their respective obligations. Such agreement may incorporate this Agreement by reference, may supplement or modify it or may supersede it.

11. Governing Law; Jurisdiction; Attorneys’ Fees . Internal law of the State of Texas applies to this Agreement. Each of the parties agrees that any legal or equitable action relating to this Agreement shall be brought, and each of the parties consents to personal jurlsdictlon1 in any court of general jurisdiction in Collin County, Texas, and waives any objection which it may have to the laying of venue of any such suit, action or proceeding in such court. The successful party in any legal action arising our of this Agreement may recover all costs, including reasonable attorneys’ fees.

12. Notices . Any notice required or permitted under this Agreement will be in writing and will be effective upon actual receipt. Notices shall be sent to the addresses set forth in the introductory paragraph of this Agreement, and a copy of any notice to AmerisourceBergen Specialty Group, Inc. shall also be sent to AmerisourceBergen Specially Group, Inc., Attn: Group Counsel, lN-El86, 3101 Gaylord Parkway, Frisco, TX 75034.

13. Interpretation . This Agreement is the entire agreement between the parties with respect to its subject matter and supersedes any prior agreement, written or oral. This Agreement will bind and benefit the parties and their successors. This Agreement may be assigned by AmerisourceBergen Specialty Group, Inc. to any affiliate hut may not be otherwise assigned without the consent of the other party, which consent will not be unreasonably withheld. For purposes of Agreement, “affiliate” means any company or person that directly or indirectly controls, is controlled by or under common control with the referenced party, as the case may be. If any provision is invalid, validity of remaining provisions will not be affected. This Agreement may not be amended or modified except in a writing signed by both paties. Any waiver or delay by any party in enforcing this Agreement will not deprive it of the right to take appropriate action at a later time or due to another breach. Captions in this Agreement are intended for convenience of reference only. Words, regardless of the number and gender specifically used, will be construed to include any other number, singular or plural, and any gender, masculine, feminine, or neuter, as the context requires. “And” includes “or.” “Or” is disjunctive but not necessarily exclusive. “Including” means “including but not limited to.” This Agreement may be executed in counterparts. Any provision of this Agreement may survive this Agreement’s expiration or earlier termination if its context shows that the parties intended it to survive.

IN WITNESS WHEREOF, the parties have executed this Mutual Non-Disclosure Agreement as of its Effective Date.

 

    AmerisourceBergen Specialty Group, Inc.   Corcept Therapeutics, Inc.
  By:  

/s/ James D. Frary

    By:  

/s/ Joseph K. Belanoff

  Title:  

James Frary

    Title:  

Joseph K. Belanoff, M.D.

  Title:  

President, ABSG

    Title:  

Chief Executive Officer

 

Page 23


 

LOGO

EXHIBIT A

CONTINUING GUARANTY AND INDEMNIFICATION AGREEMENT

The undersigned does hereby guarantee to AmerisourceBergen Corporation and each of its subsidiary companies and their successors that any food, drugs, devices, cosmetics, or other merchandise (“Products”) now or hereafter shipped or delivered by or on behalf of the undersigned, its subsidiaries, divisions, affiliated companies and representatives (“Guarantors”) to or on the order of AmerisourceBergen Corporation or any of its subsidiaries will not be, at the time such shipment or delivery, adulterated, misbranded, or otherwise prohibited under applicable federal, state and local laws, including applicable provisions of the Federal Food, Drug and Cosmetic Act, 21 U.S.C.A. §301 et seq., (“FDCA”), and Sections 351 and 361 of the Federal Public Health Service Act, 42 U.S.C.A. §§ 262 and 264, and their implementing regulations (“Applicable Laws”), each as amended and in effect at the time of shipment or delivery of such Products; and such Products are not, at the time of such shipment or delivery, merchandise which may not otherwise be introduced or delivered for introduction into interstate commerce under Applicable Laws, including FDCA section 301 (21 U.S.C.A. §331); and such Products are merchandise which may be legally transported or sold under the provisions of any other applicable federal, state or local law; and Guarantors guarantee further that, in the case of food shipments, only those chemicals or sprays approved by federal, state or local authorities have been used, and any residue in excess of the amount allowed by any such authorities has been removed from such Products.

Guarantors hereby agree to defend, indemnify and hold AmerisourceBergen Corporation and each of its subsidiaries harmless against any and all claims, losses, damages, and liabilities whatsoever (and expenses connected therewith, including counsel fees), arising as a result of (a) any actual or asserted violation of Applicable Laws or by virtue of which Products made, sold, supplied, or delivered by or on behalf of Guarantors may be alleged or determined to be adulterated, misbranded or otherwise not in full compliance with or in contravention of Applicable Laws, (b) possession, distribution, sale and/or use of, or by reason of the seizure of, any Products of Guarantors, including any prosecution or action whatsoever by any governmental body or agency or by any private party, including claims of bodily injury, death or property damage, (c) any actual or asserted claim that Guarantors’ Products infringe any proprietary or intellectual property rights of any person, including infringement of any trademarks or service names, trade names, trade secrets, inventions, patents or violation of any copyright laws or any other applicable federal, state or local laws, and (d) any actual or asserted claim of negligence, willful misconduct or breach of contract. Guarantors further agree to maintain primary and noncontributing Products Liability Insurance of not less than U.S. $5,000,000.00 per occurrence, Combined Single Limit (Bodily Injury and Property Damage) including AmerisourceBergen Corporation and its subsidiary companies and their successors as Additional Insureds, including a Broad Form Vendors Endorsement, with provision for at least 30 days’ prior written notice to the Additional Insureds in the event of cancellation or material reduction of coverage, and upon request promptly submit satisfactory evidence of such insurance. All insurance coverage must be with a carrier and in a form acceptable to AmerisourceBergen Corporation, at its sole discretion, including any deductible or self-insurance risk retained by Guarantors. In combination with significant excess liability insurance, any retained risk must be commercially reasonable, actuarially sound and acceptable to AmerisourceBergen Corporation, at its sole discretion. Each Guarantor warrants that its assets are sufficient to cover any self-insurance liability it assumes under this Agreement. Provisions in this Continuing Guaranty and Indemnification Agreement are in addition to, and not in lieu of, any terms set forth in any purchase orders accepted by Guarantors or any separate agreement entered into between AmerisourceBergen Corporation or any of its subsidiaries or their successors and Guarantors. In the event of any conflict between the language of such other documents and the language set forth herein, the language herein shall be controlling.

 

 
By:  

/s/ Joseph K. Belanoff, M.D.

Name:  

Joseph K. Belanoff, M.D.

Title:  

CEO

Date:  

4/27/11

 

Page 24


EXHIBIT B

CUSTOMER SERVICES

ICS shall perform the following Services on and after the Program Launch Date during the Term of the Agreement:

1. ICS, as agent of the Company, will develop, operate and maintain an Integrated Access Center (“Access Center”) to manage the comprehensive distribution Services related to Products described herein (“Customer Services”) for the Company. ICS agrees to develop the Access Center and provide the Customer Services for the fees listed in Schedule B.

2. The Access Center includes the following:

 

  2.1 A fully-integrated telecommunications and information system that will capture and manage key data from each Customer requesting information or specific services relating to Products;

 

  2.2 A toll-free Company-dedicated telephone and fax number solely for the Access Center, with all costs being the Company’s responsibility;

 

  2.3 The capability to handle queries about Products related to order processing and account management; and

 

  2.4 The capability to triage queries.

3. ICS, as agent of the Company, will retain, train and manage appropriate staff personnel to operate the Access Center. Responsibilities of Access Center personnel will be to:

 

  3.1 Receive orders via Electronic Data Interchange (“EDI”), facsimile, email, mail or telephone, and (b) be available from 8:00 a.m. to 5:00 p.m. (Central) to receive orders or triage calls to the Company as necessary;

 

  3.2 Receive EDI orders from the Company or its Customers. Upon receipt, ICS will:

 

  3.2.1 Verify that product order file processed from customer and into ICS’ ERP system;

 

  3.2.2 Review EDI order processing error logs and communicate any non-processed orders and reasons to the Company or its Customers; and

 

  3.2.3 Take appropriate action based on direction from the Company to resolve any issues and re-enter orders or order files into the ERP for processing;

 

  3.3 Generate and issue packing slips for the sale of Products sold under this Agreement;

 

  3.4 Manage the process of issuing Product return authorizations and Product destruction authorizations in accordance with the Company’s policies that have been provided to ICS, and coordinate shipment of Product for destruction;

 

  3.5 Set up customer accounts for Customers eligible to purchase from the Company according to parameters provided by the Company, and the Company will periodically supply ICS with its written criteria, as amended from time to time, for all Customer eligibility; and

 

Page 25


  3.6 At the Company’s prior written request, verify that such Customers meet the Company’s eligibility criteria by:

 

  3.6.1 Credit verification using approved agencies and establishment of credit limits based on the Company’s guidance;

 

  3.6.2 Verification of licenses (including verification of DEA and state controlled substances, regulatory licenses and registrations when filling orders of controlled substances); and

 

  3.6.3 License verification using the NTIS database augmented by a copy of the Customer license if necessary; and

 

  3.7 Obtain Proofs of Deliveries (PODs) for the Company.

4. Order allocations encompass any inbound orders to ICS that need to have original conditions reviewed and/or manipulated as opposed to allowing the order to flow freely through the order process system. All allocated orders shall be filled in accordance with the Company’s written instructions.

5. An order is defined as a shipment to a unique address that leaves the distribution center, regardless of the number of cartons or packages that constitute that shipment and/or the number of inbound requests for such order.

6. The following services are not a part of Customer Services normally provided in the Access Center:

 

  6.1 Product substitution relating to backorder management:

 

  6.2 Stock allocation of Product to the Company’s Customer base:

 

  6.3 Arranging for the re-distribution of Product within the Company’s Customer base; or

 

  6.4 Any services not identified in paragraphs 1 through 3 of this Exhibit B.

 

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EXHIBIT C

WAREHOUSING AND INVENTORY MANAGEMENT SERVICES

ICS shall perform the following Services on and after the Program Launch Date during the Term of the Agreement:

1. ICS will warehouse and inventory Products at the ICS Facility.

2. ICS will visually inspect each shipment of Product for external container or package damage or loss in transit (based upon records provided to ICS by the Company)

3. ICS will promptly notify the Company upon ICS’s discovery of any damage or loss to Product.

4. ICS will quarantine Product upon receipt and will release Product to salable inventory status within twenty-four (24) hours of written authorization from the Company.

5. ICS will store all Product in compliance with current good manufacturing practice regulations and guidelines and other requirements of the FDA, the U.S. Drug Enforcement Administration (including maintaining required registrations, licenses and other authorizations, observing all DEA security standards and timely filing any necessary ARCOS reports and other DEA forms, including DEA form 222), all other applicable Requirements of Law and in accordance with the Company’s written instructions, if any.

6. The Company will pay all costs, charges, expenses and import and export duties for delivery and transportation of Product to and from an ICS Facility; provided that ICS shall be responsible for the costs of any transfers of Product from one ICS Facility to another ICS Facility that are initiated by ICS and not requested by the Company.

 

Page 27


EXHIBIT D

DISTRIBUTION SERVICES

ICS shall perform the following Services on and after the Program Launch Date during the Term of the Agreement:

1. Distribution . ICS shall provide the following distribution tasks:

 

  1.1 ICS shall use its best efforts to ensure that Products will be distributed by trained personnel either in corrugated boxes obtained by ICS or in the corrugated boxes in which Products are packaged by the manufacturer.

 

  1.2 ICS shall use it best efforts to ship Products within [***] of receipt of orders by ICS unless otherwise specified under the terms of this Agreement. ICS will not be required to ship within [***] if the aggregate of the orders transmitted to ICS on a single day exceed the number of average daily orders received by ICS for the previous [***]of the total of such orders. ICS will ship Product to the [***] will ship out of the ICS Facility on the same day the order is received.

 

  1.3 ICS shall ship Veterans Administration and other government orders direct or to the designated PPV (Preferred Pharmaceutical Vendor).

 

  1.4 ICS shall distribute bulk shipments by a designated carrier using carrier bulk shipment terms.

 

  1.5 ICS shall use its best efforts to ensure that Products are distributed on a FEFO (first expired/first out) basis unless otherwise directed by the Company in writing.

 

  1.6 At the prior written request of the Company, ICS shall deliver Products as a drop ship to Customers and billed to the designated wholesaler.

 

  1.7 ICS shall use its best efforts to ensure that non-EDI orders received by ICS during standard warehouse hours of shipping (currently M-F 8:00 a.m. to 3:00 p.m. Eastern, except holidays) will be filled [***]. ICS shall also use its best efforts to ensure that orders received after this agreed upon cut-off time will be processed no later than the next business day. ICS shall use its best efforts to ensure that EDI orders will be processed within [***] to ICS. ICS will not be obligated to fulfill order within such time periods if orders received by ICS on a single day exceed the number of average daily orders received by ICS for the previous [***] of the total of such orders.

 

  1.8 At the Company’s request, ICS shall provide a “Rush Order” service for specific order or orders to be processed and shipped the same day; provided however, that such services are dependent on ICS's ability to perform based upon order receipt time, ICS personnel, and transportation carrier availability. Such orders shall be subject to the Company’s payment of the additional fees pursuant to Schedule B .

 

  1.9

At the Company’s request, ICS shall provide “Emergency Order” services, defined as any order received outside of scheduled working hours (currently M-F

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


  8:00 a.m. to 5:00 p.m. Eastern Time) requiring ICS staff to return to the ICS Facility to process the order within the same day. Such Emergency Order services will be subject to additional fees pursuant to Schedule B . ICS shall clearly identify any such orders to the Company at the time of the Company’s request.

2. Inventory . ICS will be responsible for the following inventory tasks:

 

  2.1 ICS shall receive Products from the Company or a Company designee.

 

  2.2 ICS shall ensure that any end of lot discrepancies evidenced by a difference in physical to book inventory as noted during Product distribution will trigger inventory counts and reconciliation by ICS to verify and determine, where possible, the cause for the discrepancy.

 

  2.3 ICS shall provide the Company, at ICS’s expense, [***] physical product inventory per calendar year and routine cycle counts. ICS shall perform additional physical product inventories upon the Company’s request and for an additional labor charge. Any such additional physical inventory requested by the Company will be scheduled based upon a written request from the Company and a mutually agreed upon inventory date.

 

  2.4 ICS shall obtain any required packaging materials for distribution the cost of which shall be passed through to the Company pursuant to Schedule B .

 

  2.5 ICS shall pay all labor costs for warehouse personnel providing the Services.

 

  2.6 ICS shall provide tracking for all shipments as required by the Company;

 

  2.7 ICS shall pay for all security costs for the ICS Facility and any other warehouse locations where Products may be stored in accordance with the terms of this Agreement.

 

  2.8 ICS shall process returns within seven business days of receipt at the ICS Facility.

 

  2.9 ICS shall ship outdated/damaged Products to a site reasonably designated by the Company for disposal. All transportation and destruction costs will be borne by the Company pursuant to Schedule B .

 

  2.10 ICS shall not responsible for maintaining inventory levels for Product fulfillment.

3. Product Title . The Company will at all times retain title to all of Products under this Agreement.

4. Exclusions . The following services will not be provided by ICS or included as Distribution Services under the terms of this Agreement:

 

  4.1 Processing of Department of Transportation hazardous materials.

 

  4.2 Re-stacking of inbound Products required at the ICS Facility.

 

  4.3 Any other special labeling or packaging required for Products on or for shipments leaving the ICS Facility.

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


EXHIBIT E

WAREHOUSING AND DISTRIBUTION OF SAMPLE PRODUCTS ( IF APPLICABLE)

ICS shall perform the following Services on and after the Effective Date during the Term of the Agreement. The parties’ respective obligations are set forth below.

1. Sample Products. “Sample Products” shall mean [INSERT PRODUCT NAME], which is not intended to be sold and shall be re-labeled as such and is given to customers free of charge to promote sales.

2. Storage and Shipment of Samples. ICS will warehouse, inventory and distribute Samples and Free Goods consistent with standards for warehousing, inventory and distributing Services under Exhibit B. ICS will distribute Samples by mail or common carrier. ICS’s obligation to perform Services is conditioned on the Company’s performance of tasks as specified under Exhibit B.

3. Re-Labeling of Sample Products. ICS shall perform re-labeling services reasonably requested by Company and consistent with all Requirements of Law. ICS shall ensure that each Sample Product distributed by ICS bears a label that includes one of the following statements: “Sample,” “Not for sale,” or “Professional courtesy package.” ICS shall include on the label of each Sample Product and on the outside container or packaging (if any) an identifying lot or control number that will permit the tracking of the distribution of each unit of Sample Product.

4. Recipients. For purposes of sending samples the Company will, from time to time, provide ICS with a current and accurate list of recipients authorized to receive Sample Products (“Recipients”), including additions, corrections, and deletions. At a minimum, the list will include the name and ship-to address of each Recipient. ICS will adhere to its standard operating procedures for distribution of Sample Products to Recipients, as well as all Requirements of Law, including without limitation the PDMA, pertaining to distribution of samples to Recipients.

4.1 Physician Recipients. Prior to each delivery of Sample Product by ICS to a Physician Recipient, the Company will provide ICS with a completed sample request form in a form mutually agreed upon by the Parties, which shall be signed by the physician making the request (the “Sample Request Form”). The Sample Request Form will contain the following information:

4.1.1 the applicable state license or authorization number (or DEA number where a controlled substance is requested) for the physician authorized to receive Samples Products;

4.1.2 the name, address, professional title and signature of the physician making the request;

4.1.3 the proprietary or established name and strength of the Sample Product requested;

4.1.4 the amount of Sample Product requested;

4.1.5 the date of the request;

4.1.6 the full names of the Company and ICS; and

4.1.7 any other information required by § 203.30 or other applicable law for the distribution of Sample Products to a physician.

 

Page 30


4.2 Pharmacy or Hospital Recipients. Prior to each delivery of Sample Product by ICS to pharmacy or hospital Recipient, the Company will provide ICS with a completed Sample Request Form, which is signed by the physician making the request. The Sample Request Form shall contain all of the information listed in Section 4.1 above and shall also include the name and address of the pharmacy or hospital to which the Sample Product shall be delivered.

5. Receipts for Sample Products. Upon delivery of the Sample Product, ICS shall obtain a receipt that contains the following information:

5.1 Physician Recipient. If the Recipient is a physician, the receipt will include at a minimum: (i) the signature of the physician or the physician’s authorized designee acknowledging delivery of the Sample Product; (ii) the physician’s name, address, professional title; (iii) the proprietary or established name and strength of the Sample Product; (iv) the quantity of the Sample Product delivered; (v) the date of delivery; and (vi) any other information required by law and/or regulation.

5.2 Pharmacy or Hospital Recipients. If the Recipient is a Pharmacy or Hospital, the receipt will include at a minimum: (i) the name and address of the licensed physician requesting the Sample Product; (ii) the name and address of the pharmacy or hospital designated to receive the Sample Product; (iii) the name, address, professional title and signature of the person acknowledging delivery of the Sample Product; (iv) the proprietary or established name and strength of the Sample Product; (v) the quantity of the Sample Product requested; and (vi) the date of delivery.

6. Reconciliation of Sample Product Requests and Receipts; Losses. ICS shall be responsible for reconciling sample requests, receipts and inventory of Sample Products as mutually agreed by the parties and consistent with all Requirements of Law. ICS shall report all discrepancies, thefts and losses involving Sample Products to Company promptly. Company shall develop an appropriate definition for “Significant Loss,” and shall be responsible for determining whether any discrepancy, theft or loss constitutes a Significant Loss. In the event that Company determines that a Significant Loss exists, Company shall notify the FDA of the loss consistent with PDMA requirements.

7. Record Keeping Requirements. The Company and ICS will create and maintain all applicable forms and records required by all Requirements of Law applicable to warehousing and distribution of Samples and Free Goods including PDMA, Rules and Controlled Substance Laws. Prior to the distribution of any Samples or Free Goods, the Company and ICS will identify in a separate written procedure the specific forms and records each will maintain so that distribution of Samples and Free Goods will comply with all Requirements of Law. The Company and ICS will permit the other, upon reasonable advance notice, to audit and inspect all such forms and records it creates or maintains in distributing Samples Products. The Company and ICS will cooperate and assist with, and will provide the other with access to and copies of, such forms and records as may be useful in responding to, regulatory agency inspections or requests for such forms or records.

 

Page 31


EXHIBIT F

MARKETING MATERIALS FULFILLMENT SERVICES ( If applicable)

ICS will warehouse and manage distribution of Product and clinical and marketing materials that are sent to the Company's authorized personnel (the “Company Representatives”) on and after the Program Launch Date during the Term as follows:

 

1. The Company will develop and provide to ICS all materials for use in the Access Center.

 

2. The Company will provide ICS with such bulk clinical and marketing materials in mutually agreeable packaging configuration shrink-wrapped packages designated as one “SKU” (Stock Keeping Unit). Whenever possible, the Company will direct its other vendors to adopt specifications and coding systems that are currently being utilized in ICS’s Facility, with the SKU clearly marked with Product code to be used by ICS.

 

3. ICS will charge the Company the fees in Schedule B for the storage of marketing materials.

 

4. ICS will ship orders for marketing materials by ground unless otherwise specified in writing by the Company.

 

5. Upon prior written approval from the Company, ICS will begin responding to requests for marketing materials, which requests will be directed to ICS by the Company Representatives by facsimile or electronic mail. In addition, ICS will, upon written request of the Company, ship marketing materials to medical conventions, back to the Company or the Company’s Representatives, care givers and other healthcare providers, for fees in Schedule B .

 

6. The Company will provide new product specifications as outlined in the “Product Set Up Sheets” to ICS at least five business days prior to product receipt at the warehouse.

 

7. The Company will ensure that Product is configured in the minimum order quantity for shipment purposes.

 

8. Services not covered under the terms of this Agreement include:

 

  8.1 Any marking required at ICS’s Facility for Product identification purposes; and

 

  8.2 Processing or re-stocking marketing materials returned from trade shows.

 

  8.3 Repackaging of marketing materials to meet ICS configuration requirements.

 

Page 32


EXHIBIT G

CONTRACT ADMINISTRATION AND CHARGEBACKS PROCESSING

ICS is licensed to utilize BPI Contracts software developed by BPI Technologies Corporation to provide contract administration and chargeback processing services. ICS shall perform the following Services on and after the Program Launch Date during the Term of the Agreement:

1. Contract Administration . ICS shall enter into the BPI Contracts application key demographic information, membership, and pricing arrangements, as provided by the Company, as negotiated between the Company and its key government and non-government contract accounts, including DOD and VA. ICS shall assist the Company in managing information for such accounts, but shall have no liability for the timeliness, accuracy or reliability of the information provided by the Company under this Section.

2. Chargeback Processing . ICS will process debit memo submissions from wholesalers for wholesaler contract sales pricing reconciliation.

 

  2.1 Reconciliation is based upon verification of the submitted wholesaler data against contract administration data. Results of this verification are:

 

  2.1.1 Reconciliation reporting; and

 

  2.1.2 Credit Memo generation.

 

  2.2 Submissions by wholesalers will be either paper or electronic (EDI).

 

  2.2.1 Paper - Processing time for paper submissions will [***]

 

  2.2.2 EDI - Processing time for EDI submissions will be [***]

 

  2.2.3 These times do not apply to new or newly acquired Products for a period of [***].

3. Rebates . ICS will provide documentation for rebates to be paid by the Company on a quarterly basis. ICS will also provide the Company with reports, in a format agreed upon by the parties, including pricing information for AMP and FAMP reports, and which otherwise allow the Company to monitor purchasing activity by its key accounts.

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


EXHIBIT H

ACCOUNTS RECEIVABLE MANAGEMENT AND CASH APPLICATIONS

ICS shall perform the following Services on and after the Program Launch Date during the Term of the Agreement:

1. ICS will manage all accounts receivable transactions related to the Company managed distribution programs for Product. The Company will establish a lock box at a financial institution of its choosing (the “Financial Institution”). Payments from Customers will be directed to the address of the lock box. The Financial Institution will sweep the lock box daily and deposit payments into the Company’s operating account. The Financial Institution will forward copies of all payment transactions to ICS for cash application purposes. ICS and the Company will jointly determine the following:

 

  1.1 Credit policy

 

  1.2 Class of trade designations

 

  1.3 Terms and conditions

 

  1.4 License requirements

 

  1.5 Dunning process for past due accounts

 

  1.6 Reporting requirements

2. ICS will provide comprehensive accounts receivable management services in conformance with ICS’s standard operating procedures and the Company’s collection policies as they apply to:

 

  2.1 Invoicing (prepare and mail Customer invoices)

 

  2.2 Cash application

 

  2.3 Reconciliation of daily lock box deposits

 

  2.4 Credit hold/release processing

 

  2.5 Change to Customer credit limits per the Company’s approval

Credit reports:

 

  2.5.1. Experian

 

  2.5.2 D & B

 

  2.6 Return authorization credits

 

  2.7 Credit and re-bills

 

  2.8 Reconciliation of accounts receivable to chargebacks

3. ICS will adhere to state and federally mandated good credit and collection practices established jointly by ICS and the Company such as:

 

  3.1 On-line details of calls

 

  3.2 Call list of past due invoices

 

  3.3 Past due reminder letters

 

  3.4 Research and collection of unauthorized deductions

 

  3.5 The Company approved write-offs

 

Page 34


EXHIBIT I

FINANCIAL MANAGEMENT SERVICES

ICS shall perform the following Services on and after the Program Launch Date during the Term of the Agreement:

1. ICS will provide monthly reconciliation of all financial transactions related to the Company managed distribution program for Product as follows:

 

  1.1 Month end close

 

  1.2 Reconciliation of cash, cash discounts and accounts receivable

 

  1.3 Inventory roll over

 

  1.4 Reconciliation of inventory adjustments

 

  1.5 Reconciliation of goods received

 

  1.6 Reconciliation of sales and cost of goods sold

 

  1.7 Reconciliation of returns and cost of goods returns

2. ICS will provide on a monthly basis (or other agreed upon period), the following financial reports:

 

  2.1 Trial Balance

 

  2.2 Cash Application Summary

 

  2.3 Accounts Receivable Reports

 

  2.4 Inventory Reports

 

  2.5 Sales Reports

 

  2.6 Cash Discounts Report

 

Page 35


EXHIBIT J

IT SERVICES

ICS shall perform the following Services on and after the Program Launch Date during the Term of the Agreement:

1. Application Software . ICS shall maintain a license to utilize ERP software developed by International Business Systems to provide Distribution and Financial Services to the Company.

2. Access . ICS shall ensure that access to the DataMart will be available to the Company Monday through Friday from 7:00 a.m. – 7:00 p.m. (Central) except for those holidays recognized by ICS (“Holidays”), a listing of which will be mutually agreed to by the Company and ICS. ICS will contact the Company with reasonable notice of any non-availability of the DataMart due to routine or non-routine system maintenance undertaken by ICS. “DataMart” shall be defined as the repository of information available to ICS regarding Products and related standard reports, including but not limited to daily inventory reports and inventory adjustments.

3. On-Call Support . ICS shall maintain an on-call support line for answering Company questions, receiving requests for correction of errors and providing consulting services relative to the functionality and usage of the DataMart. The support line will be available from 8:30 a.m. – 5:00 p.m. (Central) except for Holidays.

4. Training . ICS shall provide user documentation and training for DataMart through data dictionaries of DataMart; provided , however, that ICS shall have no obligation to provide Crystal Training and licenses to utilize crystal reports to the Company.

5. Back-Ups . ICS shall perform back-up of all the Company transactions at the end of each working day. Such back-up will be performed at a scheduled time each day and will use an IBM utility product to copy all ICS’s the Company data on a media selected by ICS.

6. Data Management and Reporting . ICS shall provide the Company with standard reports as may be reasonably requested by the Company from time to time. ICS has also developed a set of standard data file extracts that cover distribution and financial activity. Frequency for report or data file creation is in part based on functional requirement but may be daily, weekly, monthly or on demand. If customization is needed, the Company and ICS will jointly and reasonably determine the data elements and formats to be included in custom reports, as well as their frequency and data files. Mutually agreed-upon standard reports and files are included in the pricing provided under this Agreement. Additional charges will apply to special reports and data files created based upon hourly programming charges as listed in Schedule B for creation of specialized reports. The Company will be responsible for hardware or software costs directly and for fees listed in Schedule B .

7. Transfer Protocol . ICS will make available to the Company data in the form of electronic files on a detail or summary basis that reflects the operational activity in the Company’s DataMart or CARS/IS environment. The frequency of the data file availability may be event based, daily, weekly or monthly. Certain timing restrictions apply based on type of data. Conversely ICS will receive files from the Company for the purpose of file building, file maintenance or order processing. The data may be delivered in one of four methods: 1) Cyclone Encrypted or PGP encrypted, 2) Secure Website, 3) E-mail (emergency only) or 4) Electronic Data Interchange:

8. System Disaster Recovery . ICS shall maintain in place disaster-relief plans consisting of disaster recovery procedures, telecommunications switch over during disaster or emergency period, and AS/400 System switch over during disaster or emergency period (collectively, “Disaster Plans”). ICS will maintain the Disaster Plans during the Term.

 

Page 36

Exhibit 10.2

A MENDED AND R ESTATED E XCLUSIVE P HARMACY P RODUCT P URCHASE AND S ERVICE A GREEMENT

T HIS A MENDED AND R ESTATED E XCLUSIVE P HARMACY P RODUCT P URCHASE AND SERVICE A GREEMENT (the “Agreement”) is made this 8 th day of August, 2012, effective as of the 3 rd day of January, 2012, (the “Effective Date”) by and among CuraScript, Inc., a Delaware corporation having offices located at 6272 Lee Vista Blvd., Orlando, Florida 32822 (“CuraScript”) and its affiliate Express Scripts Specialty Distribution Services, Inc., a Delaware corporation with offices at One Express Way, St. Louis, MO 63121 (“ESSDS”) referred to herein collectively as (“CuraScript/ESSDS”), and Corcept Therapeutics Incorporated , a Delaware corporation having offices at 149 Commonwealth Drive, Menlo Park, CA 94025 (“Company”). The Parties hereto agree as follows:

W HEREAS , Company manufactures the pharmaceutical drug product Korlym™ (mifepristone) 300 mg Tablets;

W HEREAS , CuraScript owns or operates multiple specialty pharmacies that provide specialty pharmacy services throughout the United States;

WHEREAS, ESSDS will perform the specified Patient Assistance Program (PAP) services for Company; and

W HEREAS , the Parties desire to enter into this Agreement to appoint CuraScript and ESSDS as the exclusive pharmacies that can dispense Product(s), and to authorize CuraScript/ESSDS to perform specified services for Company.

N OW THEREFORE , in consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, hereby agree as follows:

 

1. T ERM : Unless and until this Agreement is terminated as provided for herein, this Agreement shall have a term of one (1) year, commencing on the Program Launch Date (“Initial Term”). Following the Initial Term, this Agreement may be extended for additional successive one-year terms (each, a “Renewal Term”) upon written mutual agreement of the parties. The parties shall negotiate any revisions or modification to the terms of the Agreement at least sixty (60) days prior to the expiration of the Initial or then current Renewal Term, as applicable. Program Launch Date is the first day that CuraScript received a valid prescription for dispensing the Product, April 6, 2012. If Company decides after the Initial Term or any Renewal Term, to allow other pharmacies to dispense the Product, CuraScript will still have access to dispense the Product to the appropriate patients per a valid prescription.

 

2 . P RODUCT : This Agreement governs CuraScript’s/ESSDS’s dispensing of those Company products set forth in Exhibit A (the “Product(s)”), which is attached hereto and incorporated by reference herein and which may be modified from time to time by the Parties upon written mutual consent.

 

3. O RDERS : CuraScript will supply purchase orders to Company on a mutually acceptable form, electronic data interface (EDI), via fax, email, or telephone. CuraScript shall be entitled to purchase the Product for any of its pharmacy locations listed in Exhibit C.

 

4. P RODUCT P RICING : F OR COMMERCIAL PRODUCT ONLY AND NOT STARTER OR PAP PRODUCT

 

  (a) Product Price : The Product Price is listed in Exhibit A.

 

Page 1 of 17

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.


  (b) Resale Price : [***]

 

  (c) Shelf Stock Adjustments : Company agrees to provide CuraScript with a shelf stock adjustment for all Product inventories held by CuraScript upon any decrease in price. The shelf stock adjustment shall be calculated by [***] Company shall pay CuraScript any Shelf Stock Adjustment payable hereunder within [***] calendar days of the effective price decrease.

 

  (d) Price Increases : [***]

 

5. PAYMENT TERMS FOR COMMERCIAL PRODUCT ONLY AND NOT PAP OR S TARTER PRODUCT : All of Company’s invoices for Product shall be due and payable by CuraScript within [***] after receipt by CuraScript; provided, however , if CuraScript pays such invoice [***] of CuraScript’s receipt of such invoice, CuraScript shall be entitled to [***], and CuraScript shall be entitled to deduct such discount from the invoiced amount payable to Company. Payments will be made by check.

 

6. D ELIVERY OF P RODUCT :

 

  (a) Risk of Loss: Purchase orders for the Product should be submitted to the person designated on Exhibit A. All deliveries of Products will be Free On Board, CuraScript’s Designated Facility. For purposes of this paragraph, the term “Free On Board, CuraScript’s Designated Facility” means that Company shall: (i) bear all costs associated with shipping Products to CuraScript’s designated Facility; (ii) bear the risk of loss until a CuraScript’s Designated Facility takes possession of the Product, which Product must be in new and acceptable condition upon receipt by CuraScript; and (iii) be responsible for insuring Products while in transit. CuraScript shall be entitled to designate more than one of its facilities for receipt of the Product.

 

  (b) Title to the Product for ESSDS. ESSDS acknowledges and agrees that, notwithstanding any receipt, storage, processing or shipment of the Product by Company, all title and ownership of the Product shall remain with the Company until delivery thereof to the Patient.

 

  (c) Inspection of Product: CuraScript/ESSDS shall examine the Product upon delivery at CuraScript’s/ESSDS’s facility and shall notify Company of any non-delivery of a portion of the shipment or any defect in any of the Product that is reasonably discoverable upon visual inspection of the Product. Within ten (10) business days after CuraScript’s/ESSDS’s receipt of the Product, CuraScript/ESSDS shall furnish to Company a description of the nature of any reasonably discoverable defect or shortage. Upon receipt of notice of any defect or shortage, Company shall promptly replace any defective or shorted Product to CuraScript/ESSDS or issue CuraScript a full credit for such defective or shorted Product, as appropriate under the circumstances. In the absence of a written notice from CuraScript/ESSDS to Company in accordance with the terms of this Section, a shipment of the Product shall be deemed to have been delivered and accepted by CuraScript/ESSDS as complete and in satisfactory condition as to defects reasonably discoverable upon visual inspection. CuraScript/ESSDS shall, at Company’s expense, follow Company’s instructions to permit Company’s inspection of the defective Product or to facilitate the return to Company (or Company’s third-party disposal company) any of the defective Product delivered to CuraScript/ESSDS. Latent Product defects existing when delivered to CuraScript’s/ESSDS’s facility will not be subject to the ten (10) business day inspection, and upon discovery, CuraScript will be entitled to a full credit or replacement of the Product, as appropriate under the circumstances.

 

Page 2 of 17

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


  (d) No Alteration: CuraScript/ESSDS will not alter the Product packaging without Company’s consent (except to remove the Product from the shipping containers) and will not alter the Product labeling, except to add a prescription label to the Product, as permitted by applicable law.

 

7. P RODUCT R ETURNS : All Products returned shall be made in accordance with Company’s standard returns policy in effect, which is attached hereto as Exhibit B and incorporated by reference herein. CuraScript will be entitled to a credit from Company at the highest price for the lot number for all Product returned in accordance with Company’s Returned Goods Policy. Notwithstanding anything herein to the contrary, all Product returns made in conjunction with this agreement will be made on behalf of CuraScript by CuraScript’s designated third party product returns company (“Third Party”). CuraScript will pay any reimbursement associated with product returns directly to CuraScript and not to the designated Third Party. In addition, all fees associated with the use of the Third Party’s services will be paid by CuraScript and not Company.

 

8. S USPENSION OF D ISTRIBUTION AND R ECALL :

 

  (a) If requested by Company for good reason, and upon written notification by Company to suspend distribution of Product, CuraScript/ESSDS shall use commercially reasonable efforts to suspend its distribution of Product. If the suspension continues for more than [***], Company will repurchase the Product held in inventory by CuraScript at the price paid for such Product by CuraScript, and CuraScript shall have the right to terminate this Agreement for material breach under the “Termination” Section of this Agreement, excluding the sixty (60) day notice period. All repurchased Product shall be returned to Company at Company’s expense.

 

  (b) Company shall promptly notify CuraScript/ESSDS of any recalls initiated by Company or required by the United States Food and Drug Administration. Upon receipt of notice of a recall from Company, CuraScript/ESSDS shall promptly notify the affected customers of CuraScript/ESSDS in accordance with CuraScript’s/ESSDS’s standard recall guidelines. Company shall provide CuraScript/ESSDS with a form letter to be used in connection with notice of any recall, subject to CuraScript’s/ESSDS review and prior written approval of the form letter, which approval shall not be unreasonably withheld or delayed. Company shall be responsible for the mailing, shipping and reasonable administrative expenses incurred by CuraScript/ESSDS in connection with the recall, plus a reasonable service fee as mutually agreed upon in advance by the parties, as well as the cost of replacement Product for CuraScript’s/ESSDS customers, provided that the reason for the recall does not arise from (i) the negligence or intentional misconduct of CuraScript/ESSDS or any of its agents or employees; or (ii) failure of CuraScript to comply with the terms of this Agreement. CuraScript/ESSDS shall cooperate in any recalls by providing relevant Product information to Company.

 

  (c) CuraScript/ESSDS shall maintain for [***]after termination or expiration of this Agreement such information as reasonably required in the event of a Product recall after termination or expiration of this Agreement, and shall make such information available to Company, at Company’s expense, in the event of such a recall.

 

Page 3 of 17

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


  (d) CuraScript shall use its commercially reasonable efforts to cooperate with Company in investigating any Product failure that resulted in the need for a recall and any reasonable costs involved with such investigation will be incurred by the Company.

 

9. O WN U SE : The Product purchased by CuraScript pursuant to this Agreement will be used by CuraScript (and/or CuraScript’s wholly-owned subsidiary pharmacies) for dispensing Product as a pharmacy to patients pursuant to valid prescriptions, and neither CuraScript nor its wholly-owned subsidiaries will wholesale Product purchased under this Agreement unless permitted to do so under applicable law. Nothing herein shall be construed to limit CuraScript’s ability to conduct intra-company transfers of Product among CuraScript’s pharmacies, which includes those pharmacies directly owned by CuraScript and those affiliated pharmacies which are owned or operated by a CuraScript subsidiary.

 

10. E XCLUSIVITY : CuraScript and ESSDS are appointed as the exclusive pharmacies which will dispense the Product. Nothing herein, however, shall be construed to limit CuraScript from entering into other agreements with other manufacturers or wholesalers that allow CuraScript to dispense products that compete with Company’s Products.

 

11. P RODUCT P ROMOTION : CuraScript will not promote Company’s Products, but CuraScript will promote its own specialty pharmacy services to its customers in accordance with CuraScript’s standard business practices, which typically include (but are not necessarily limited to) informing its customers of pricing available for products distributed by CuraScript. Accordingly, CuraScript shall not distribute or generate any promotional material containing claims relating to the Product. CuraScript may, however, provide its customers with educational information concerning the Product. Company represents and warrants that any materials relating to the Product that it provides to CuraScript: (i) are limited to communications that are intended to describe the Product or provide important Product-related information; (ii) if required under applicable law, have received the appropriate regulatory approval(s) prior to use ( e.g. , FDA approval); (iii) do not involve the counseling or promotion of any off-label use; (iii) do not constitute “marketing” (as defined by HIPAA) if distributed by CuraScript to patients.

 

12. D IVERSION : CuraScript shall promptly notify Company upon learning of any activity that appears to illegally divert any Products.

 

13. S ALES O UTSIDE THE U NITED S TATES : CuraScript agrees not to dispense or otherwise distribute Products outside of the United States, its territories or possessions, unless otherwise agreed to between the Parties in a written amendment to this Agreement.

 

14. T ERMINATION : This Agreement is made in good faith based on the assumption that early termination shall not be required. Notwithstanding the foregoing, early termination shall be permissible as follows:

 

  (a) By either Party with sixty (60) days written notice for any reason or for material breach by either Party.

 

  (b) Immediately upon notification or at any time thereafter, either Party may terminate this Agreement in the event that:

 

  (i) the other Party shall file any petition under any bankruptcy, reorganization, insolvency or moratorium laws, or any other law or laws for the relief of or in relation to the relief of debtors;

 

Page 4 of 17


  (ii) there shall be filed against the other Party any involuntary petition under any bankruptcy statute or a receiver or trustee shall be appointed to take possession of all or substantial part of the assets of the party which has not been dismissed or terminated within sixty (60) days of the date of such filing or appointment;

 

  (iii) the other Party shall make a general assignment for the benefit of creditors or shall become unable or admit in writing its inability to meet its obligations as they mature;

 

  (iv) the other party shall institute any proceedings for liquidation or the winding up of its business other than for purposes of reorganization, consolidation or merger; or

 

  (v) [***]

 

  (c) Immediately upon notification or at any time thereafter, by either Party if the terms of this Agreement are determined by either Party in good faith to be inconsistent with any applicable law.

 

15. F EDERAL P ROGRAMS : The Parties represent, warrant, and certify that neither they nor their principals were or are debarred, suspended, proposed for debarment, or otherwise determined to be ineligible to participate in Federal health care programs (as that term is defined in 42 U.S.C. 1320a-7b(f)) or convicted of a criminal offense related to the provision of health care items or services (collectively, an “adverse enforcement action”). If either Party becomes the subject of an adverse enforcement action, that Party will notify the other Party promptly.

 

16. S TATUTORY AND R EGULATORY C OMPLIANCE : CuraScript/ESSDS and Company shall comply with all applicable federal, state, and local laws and regulations governing their activities related to this Agreement, including without limitation, laws related to fraud and abuse, false claims, patient confidentiality and/or privacy, provision of samples, and prohibition on kickbacks. Without limiting the generality of the foregoing, the Parties further agree as follows:

 

  (a) Discounts. The Parties have endeavored to structure the prompt pay discount arrangement set forth above, and the Discounted Product Price set forth in Exhibit A (collectively, the “discounts”) as discounts consistent with the applicable characteristics of the statutory discount exception (42 U.S.C. § 1320a-7b(b)(3)(A)) and the discount safe harbor (42 C.F.R. § 1001.952(h)). The applicable fixed percentages pursuant to which the discounts will be paid have been set in advance, as set forth herein and Exhibit A. The discounts set forth in this Agreement are not dependent on, and do not operate in conjunction with, (either explicitly or implicitly) any other arrangement or agreement between Company and Distributor. Company represents and warrants that: (i) it will refrain from doing anything that would impede CuraScript from meeting any reporting obligations CuraScript may have under applicable law; (ii) it will comply with all reporting requirements for pharmaceutical manufacturers under all Federal health care programs and, in particular, will include any and all discounts paid hereunder in its calculations of “average manufacturer price” (“AMP”) or “best price” under the Medicaid drug rebate program, and in the calculations of “average sales price” (“ASP”) under Medicare, to the extent applicable; (iii) it will properly report the existence of the discounts on the invoices or statements submitted by Company to CuraScript; and (iv) no discount paid pursuant to this Agreement is intended in any way as a discount related to a drug formulary or drug formulary activities and has not been negotiated or discussed between the Parties in connection with any such drug formulary or formulary activities. To the extent required under applicable law, CuraScript will report the discounts to appropriate Federal health care programs, and, in any event, will promptly disclose such discounts if requested by a governmental agency.

 

Page 5 of 17

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


  (b) HIPAA Compliance : Notwithstanding anything to the contrary herein (including the exhibits hereto), CuraScript/ESSDS shall only provide information to Company in a manner consistent with HIPAA. Accordingly, the parties agree that CuraScript/ESSDS shall only provide Company information that is de-identified in accordance with HIPAA’s de-identification provision, 45 C.F.R. § 164.514(b)(2), unless CuraScript: (i) has on file a valid, HIPAA-compliant authorization for each patient whose PHI is sought to be disclosed; or (ii) authorization is not required under applicable law in order to disclose the PHI. If CuraScript does not have on file a valid, HIPAA-compliant authorization for each patient whose PHI is sought by Company, but Company nonetheless seeks such PHI because the aforementioned de-identified information is insufficient, then Company represents and warrants that any request by Company for such PHI is for one of the “public health activities” exceptions codified at 45 C.F.R. §164.512(b) and that the amount of PHI sought by Company shall be only that amount of PHI minimally necessary for Company to perform such public health activities. In such case, Company represents and warrants that it shall only use and/or disclose the PHI it receives from CuraScript/ESSDS for such public health activities, and upon request Company shall provide CuraScript/ESSDS reasonable written assurance, at the time of Company’s request for such PHI, that the unauthorized disclosure of the PHI by CuraScript/ESSDS will satisfy the requirements of 45 C.F.R. § 164.512(b), or such other provision of HIPAA that would enable the contemplated disclosure. In the event de-identified information is suitable, Company represents and warrants that it will not identify the individual who is the subject of the de-identified information.

 

  (c) Pedigree Law Compliance . By executing this Agreement, Company hereby designates CuraScript, and CuraScript accepts such designation, as an authorized distributor of record for purposes of the parties’ compliance with the Prescription Drug Marketing Act of 1987, as amended by the Prescription Drug Amendments of 1992, and as may be further amended from time to time, and any and all applicable state pedigree laws having the same or similar designation as an authorized distributor of record.

 

  (d) Regulatory Approvals . Company represents and warrants that it has received all applicable regulatory and/or statutory approvals in order for it to lawfully distribute the Product(s) to CuraScript hereunder.

 

  (e) FDA Compliance. Company hereby represents that at the time of commercial sale of the Product Company will have received clearance from FDA to market the Product in the United States. In the event FDA or any other governmental entity withdraws its marketing clearance for the Product, Company shall promptly notify CuraScript. Furthermore, Company represents and warrants that, at the time of shipment or delivery from Company, the Products (a) shall not be adulterated, misbranded, or otherwise prohibited within the meaning of the Federal Food, Drug and Cosmetic Act, 21 U.S.C.A. 301 et. Seq., as amended, and in effect at the time of shipment or delivery (the “Act”) or within the meaning of any applicable state or municipal law in which the definition of adulteration or misbranding are substantially the same as those contained in the Act; and (b) shall not be merchandise which may not be introduced or delivered for introduction into interstate commerce under the provisions of sections 301, 404 or 505 of the Act (21 U.S.C.A. 331, 344 and 355).

 

Page 6 of 17


17. C ONFIDENTIALITY : Each Party shall take all reasonable actions and do all things reasonably necessary to ensure that any information contained in this Agreement, as well as any information relating to this Agreement or is acquired by virtue of this Agreement (in either case, “Confidential Information”) shall not be disclosed or used for purposes outside this Agreement; provided, however, that the foregoing shall not apply to information that: (i) is provided to the disclosing Party’s attorney or accountant; (ii) is requested by a legal or regulatory authority; (iii) is provided by the disclosing Party to its Affiliate (provided such Affiliate is subject to the confidentiality restrictions herein), and for the purpose of this section “Affiliate” shall mean an entity which the disclosing Party maintains an ownership position; (iv) a Party can show it knew prior to disclosure without obligation of confidentiality; (v) is or becomes public knowledge through no fault of said Party; (vi) is lawfully disclosed by a third Party under no obligation of confidentiality; or (vii) is required to be disclosed pursuant to court order or by law. This Section shall survive any termination of this Agreement for a period of five (5) years thereafter. Each Party shall either return to the disclosing Party, or destroy, all Confidential Information received hereunder upon the expiration or termination of this Agreement, except that either Party may retain one (1) copy of such Confidential Information in order to satisfy any future legal obligations it may have. Notwithstanding anything to the contrary contained herein, if reasonably necessary, CuraScript/ESSDS shall be permitted to disclose to potential and existing customers of CuraScript (and any potential purchaser of CuraScript) the general terms of this Agreement. Notwithstanding anything to the contrary herein, CuraScript/ESSDS shall not be entitled to sell its purchasing data (which may include data relating to the Product) to third parties (e.g., IMS or Wolters Kluwer).

 

18. M UTUAL I NDEMNIFICATION :

 

  (a) CuraScript/ESSDS will indemnify and hold Company harmless from and against any loss, cost, damage, expense, or other liability, including, without limitation, reasonable costs and attorney fees (“Costs”) incurred in connection with any and all third Party claims, suits, investigations or enforcement actions (“Claims”) as a result of CuraScript’s/ESSDS’s negligent acts, negligent omissions, or willful misconduct, or CuraScript’s breach of this Agreement.

 

  (b) Company will indemnify and hold CuraScript/ESSDS harmless from and against any Costs for Claims incurred by CuraScript/ESSDS as a result of Company’s manufacturing of the Products, negligent acts, negligent omissions, willful misconduct, or Company’s breach of this Agreement.

 

  (c) As a condition of indemnification, the Party seeking indemnification shall notify, to the extent possible under applicable law, the indemnifying Party in writing promptly upon learning of any Claim for which indemnification may be sought hereunder. The indemnifying Party shall have a right to participate in the defense of such Claim, and the Parties will cooperate in such defense. No Party shall have an obligation to indemnify the other Party as described herein with respect to any claim settled without the mutual written consent of both Parties, which consent shall not be unreasonably withheld.

 

19. L IMITATION OF L IABILITY : In no event shall either party be liable to the other under this Agreement for any special, incidental, indirect, exemplary, or consequential damages, whether based on breach of contract, warranty, tort (including negligence), lost profits or savings, punitive damages, injury to reputation, loss of customers or business, product liability, or otherwise, and whether or not such party has been advised of the possibility of such damage. The parties acknowledge and agree that the foregoing limitations of liability are a condition and material consideration for their entry into this Agreement.

 

20. I NSURANCE : CuraScript/ESSDS and Company shall maintain such policies of general liability, professional liability, and other insurance of the types and in amounts customarily carried by their respective businesses. Notwithstanding the foregoing, Company shall, at a minimum, maintain throughout the term of this Agreement commercial products liability coverage, either through commercial insurance or a self insured retention pool, in an amount no less than [***]. Each Party shall provide the other with reasonable proof of insurance upon written request.

 

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[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


21. N OTICE : Any notice, demand, request, consent, or approval required or permitted hereunder shall be in writing and shall be delivered: (i) personally; (ii) by certified mail, return receipt requested, postage prepaid; (iii) by facsimile transmission; or (iv) by overnight courier by a nationally recognized courier service, to the address indicated below or to such other address as may be designated in writing by each Party from time to time.

If to Company:

Corcept Therapeutics

ATTN: Commercial Operations

149 Commonwealth Drive

Menlo Park, CA 94025

If to CuraScript:

Express Scripts, Inc.

c/o CuraScript, Inc.

One Express Way

St. Louis, MO 63121

Attn: Legal Department

With Copy to:

CuraScript, Inc.

6272 Lee Vista Boulevard

Orlando, FL 32822

Attn: Pharma Contracting Department

All such communications shall be deemed to have been received by the intended recipient: (i) five (5) business days following deposit in the United States Mail if sent by certified mail; (ii) on the day actually received if delivered personally; (iii) upon confirmation of receipt of a facsimile transmission if sent by facsimile; or (iv) on the next business day if sent by overnight carrier.

 

22. S EVERABILITY : In the event any portion of this Agreement not material to the remaining portions hereof shall be held illegal, void or ineffective, the remaining portions hereof shall remain in full force and effect. Subject to the consent of both Parties, such consent not to be unreasonably withheld, if any of the terms or provisions of this Agreement are in conflict with any applicable statute or rule of law, then such terms or provisions shall be deemed inoperative to the extent that they may conflict therewith and shall be deemed to be modified to conform with such statute or rule of law.

 

23. A UDIT : Both Parties shall have the right to conduct an audit of the other Party’s books and records with thirty (30) days advance written notice to determine whether the other Party has complied with the terms and provisions of this Agreement. Each Party shall pay their respective expenses associated with the audit. The audit shall be conducted at the audited Party’s place of business during such Party’s normal business hours, provided that the auditors agree to be bound by confidentiality restrictions no less restrictive than are set forth above in the Confidentiality Paragraph set forth above in this Agreement. In the event Company seeks to audit CuraScript and in connection with such audit Company seeks to access PHI, then such access to PHI must be consistent with the “HIPAA Compliance” subsection of the “Statutory and Regulatory Compliance” paragraph above.

 

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24. E NTIRE A GREEMENT : With regard to the issues addressed herein, this Agreement and the exhibits hereto contain the entire agreement and understanding of the Parties, and supersedes any and all prior agreements and understandings regarding the same subject matter. No amendment, modification, revision, representation, warranty, promise or waiver of or to this Agreement shall be effective unless the same shall be in writing and signed by both Parties. However, the Parties may modify Exhibit B (Returned Goods Policy) and Exhibit C (Facility Sites) by providing a written notification to the other party.

 

25. C OUNTERPARTS : This Agreement may be executed in any number of counterparts, all of which together shall constitute one and the same instrument.

 

26. A SSIGNMENT : Neither Party may assign this Agreement without the written consent of the other, provided however, that CuraScript/ESSDS may assign this Agreement to any affiliate that is wholly owned by its corporate parent, or to CuraScript’s/ESSDS corporate parent.

 

27. F ORCE M AJEURE : Notwithstanding anything to the contrary herein, neither Party shall be liable in any manner for any delay to perform its obligations hereunder which are beyond a Party’s reasonable control, including, without limitation, any delay or failure due to strikes, labor disputes, riots, earthquakes, storms, hurricanes, floods or other extreme weather conditions, fires, explosions, acts of God, embargoes, war or other outbreak of hostilities, government acts or regulations, or the failure or inability of carriers, suppliers, delivery services, or telecommunications providers to provide services necessary to enable a Party to perform its obligations hereunder. In any such circumstance, the Party unable to perform its obligations shall notify the other Party of such circumstance, and said other Party shall have the right to terminate this Agreement immediately upon provision of written notice if the Party of the first part continues to be unable to perform its obligations hereunder for a period of thirty (30) days.

 

28. W AIVER : No waiver of any term of this Agreement shall be valid unless waived in writing and signed by the Party against whom the waiver is sought. The failure of either Party to require performance by the other Party of any provision hereof shall not affect in anyway the right to require such performance at any time thereafter.

 

29. I NDEPENDENT C ONTRACTORS : Nothing in this Agreement is intended to create any relationship between CuraScript/ESSDS and Company other than as independent contractors and neither Party, nor any of their employees, staff, agents, officers or directors shall be construed to be the agent, fiduciary, employee, or representative of the other.

 

30. C HOICE OF L AW : This Agreement and performance of the obligations hereunder, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the conflicts of laws provision therein.

 

31. S URVIVAL : The Confidentiality and indemnification obligations described in this Agreement shall survive the termination of this Agreement. These ongoing obligations shall be binding upon both parties regardless of the reason for the termination of this Agreement.

 

32. T HIRD P ARTY B ENEFICIARIES : This Agreement is not a third Party beneficiary contract, and, therefore, there are no third Party beneficiaries to this Agreement.

 

33. E XHIBITS AND S CHEDULES : In the event of any conflict or inconsistency between the provisions of this Agreement and any exhibits or schedules hereto, the provisions of the body of this Agreement shall control.

 

Page 9 of 17


34. C ORPORATE D ISCLOSURE S TATEMENT : CuraScript is a diversified healthcare company principally focused on specialty pharmacy, biotech distribution, and related services. CuraScript wholly owns Priority Healthcare Corporation (“PHC”), a company that owns or operates specialty and infusion pharmacies, wholesale distribution facilities, and a group purchasing organization. CuraScript is wholly-owned by Express Scripts, Inc. (“Express Scripts”), which is a publicly traded diversified health care company that, in addition to owning CuraScript, owns or operates several other businesses, including (but not limited to) one of the nation’s largest pharmacy benefit managers and several mail service pharmacies. More information on Express Scripts can be found in its public filings with the Securities and Exchange Commission. Each of the Express Scripts, CuraScript, and PHC businesses already may have (or may develop in the future) relationships with vendors, including vendors that contract with CuraScript to provide goods and services to CuraScript’s customers. These relationships may involve discounted purchasing relationships, rebate-type arrangements, and payments for services. If Company desires additional information regarding any of the information that already has been provided in this Corporate Disclosure Statement, CuraScript will provide Company with such additional information upon request.

[ SIGNATURE PAGE FOLLOWS ]

 

Page 10 of 17


I N WITNESS WHEREOF , the undersigned, duly authorized, has executed this Exclusive Pharmacy Product Purchase and Service Agreement, effective as of the date set forth herein.

 

C URA S CRIPT , I NC .      C ORCEPT T HERAPEUTICS I NCORPORATED

By:

 

/s/ Kevin Cast

     By:  

/s/ Joseph K. Belanoff

Print

Name:

 

Kevin Cast

    

Print

Name:

 

Joseph K. Belanoff

Title:

 

VP, Strategy and Contracting

     Title:  

CEO

E XPRESS S CRIPTS S PECIALTY D ISTRIBUTION S ERVICES , I NC .     

By:

 

/s/ Kevin Cast

      

Print

Name:

 

Kevin Cast

      

Title:

 

VP, Strategy and Contracting

      

 

Page 11 of 17


E XHIBIT A

P RODUCT P RICING

 

P RODUCT

   NDC      S TRENGTH      S IZE    P RODUCT
P RICE
    D ISCOUNTED
P RODUCT  P RICE *
 

Korlym (mifepristone) 300 mg Tablets

     76346-073-01         300 mg       Bottle of 28      [ ***]      [ ***] 

Korlym (mifepristone) 300 mg Tablets

     76346-073-02         300 mg       Bottle of 280      [ ***]      [ ***] 

[***]

All purchase orders should be submitted to:

Corcept/ICS Customer Contact Number: (855) 803-9482

Toll free fax number for Corcept: (855) 803-9483

Customer Service e-mail: Corcept@icsconnect.com

 

Page 12 of 17

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


E XHIBIT B

C OMMERCIAL P RODUCT

R ETURNED G OODS P OLICY

Corcept Therapeutics Incorporated

RETURNED GOODS POLICY

Before returning any product to Corcept Therapeutics Incorporated (“Corcept”), customers must first call Corcept Customer Service 855-803-9482 and obtain a Return Authorization (“RA”) number.

All products returned to Corcept without an RA number will be refused

Products Eligible for Return

 

  1. Received by customer as damaged – Products received damaged may be returned for full credit, including freight, when reported within [***] days of receipt. If product is received damaged, please have the transportation company note “damaged” or “broken” on the freight bill. Claims with UPS or Registered Postal Service should remain in the original carton for inspection.

 

  2. Received by customer in error or shortages – Product shipped in error by Corcept may be returned within [***] days of invoice date.

 

  3. Ordered by the customer in error – Products ordered in error may be returned when reported within [***] days of receipt.

 

  4. Expired product – Expired product must be received within twelve (12) months after expiration for credit to be issued. Expired product approved by Corcept for return must be shipped freight prepaid within [***] days of authorization date.

 

  5. Corcept will issue authorization for the return of eligible, unopened product only (no partial containers except in GA, MS, and NC and where mandated by state statute).

 

  6. Product must be in its original container bearing its original label.

Products Not Eligible for Return

 

  1. Product involved in fire, sacrifice or bankruptcy sale; or items that have been damaged due to conditions beyond the control of the manufacturer, such as improper storage, heat, cold, water, smoke, fire, or negligence.

 

  2. Product not properly stored as outlined by the Prescription Drug Marketing Act.

 

  3. Product that has been discontinued by Corcept for more than 12 months.

 

  4. Product that has been opened or partial containers (except where mandated by state statute).

 

  5. Product that has been obtained via free goods.

 

  6.

Product returned by other than the purchaser (except by 3 rd Party Processor agent).

 

  7. Product purchased directly from a drug wholesaler should be returned to the wholesaler for credit.

 

  8. Product sold with the specific understanding that it is non-returnable.

 

  9. Product originally sold through other than normal domestic channels of distribution or purchased from a source other than an approved distribution center of Corcept.

 

  10. Product that has been repackaged or is in other than Corcept containers/packages.

 

  11. Product more than 12 months past the expiration date.

 

  12. Product that is obtained in violation of state or federal regulations.

 

  13. A Certificate of Destruction does not qualify as an acceptable format for product return.

 

  14. Product in which the lot number and/or expiration date is missing, illegible, covered, and/or unreadable on the original container.

 

Page 13 of 17

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


  15. Product that Corcept determines, in its sole discretion, is otherwise adulterated, misbranded, or counterfeit.

 

  16. To obtain authorization to return product for credit, please call Corcept Customer Service (855) 803-9482 with the following information:

 

•     Product Name

 

•     Billing Address

•     Quantity for each Product

 

•     Shipping Address

•     Lot Numbers (if available)

 

•     Reason for Return (e.g., concealed damage)

•     Unit Price

 

•     Contact Person

•     Debit Memo Number

 

Customer Service will provide an RA number for those items approved for credit. All returns must have the RA number clearly marked on the outside of the parcel. Include shipping and debit memo documentation with any returned goods. Corcept recommends that all customers insure return goods shipments. No product will be accepted for return without an RA number.

Terms of Return Policy

 

  1. Credit for returned goods is issued at the highest price for the lot number, or at applicable contract price less third party handling charge, whichever is lower.

 

  2. Transportation charges are to be prepaid by customer. No credit will be issued for administration, shipping or handling, including third party processing fees.

 

  3. Exclusive of ordering/shipping errors, merchandise returned within 120 days of purchase is subject to a restocking fee of up to 10%, excluding during the announced time period of new product launches.

 

  4. Deductions from payables may not be taken until a credit memo is issued.

 

  5. Unauthorized deductions for returns may result in held orders.

 

  6. For items purchased from a wholesaler, credit will be issued through the wholesaler.

 

  7. Returns should be channeled through the original source of purchase. The original source of purchase is defined as the entity that was directly invoiced by Corcept and the distributor of origin.

 

  8. Returns are subject to final count and acceptance by Corcept. Reimbursement for partial bottles of tablets will be based on individual tablet count. Corcept reserves the right to accept or reject any merchandise for credit.

 

  9. Corcept reserves the right to destroy, without recourse, all returned packages.

 

  10. Unauthorized returns may be destroyed and not reimbursed.

 

  11. Corcept reserves the right to inspect all authorized returns prior to issuing credit and to destroy products deemed unfit for sale whether or not they are eligible for credit.

Corcept’s returned goods policy is subject to change at any time and without prior written notice to other parties.

 

Page 14 of 17


C ORCEPT -O WNED P RODUCT

R ETURNED G OODS P OLICY

Corcept Therapeutics Incorporated

RETURNED GOODS POLICY

Before returning any product to Corcept Therapeutics Incorporated (“Corcept”), Vendors must first call Corcept Customer Service at 1-855-803-9482 and obtain a Return Authorization (“RA”) number.

All products returned to Corcept without an RA number will be refused

This policy applies to Corcept-owned product only, being held at a vendor site for

shipment of Patient Assistance Program or Starter prescriptions.

Products Eligible for Return

 

  1. Expired product – Expired product must be received within twelve (12) months after expiration date.

 

  2. Product must be in its original container bearing its original label.

Products Not Eligible for Return

 

  1. Product that has been repackaged or is in other than Corcept containers/packages.

 

  2. Product more than 12 months past the expiration date.

 

  3. Product that is obtained in violation of state or federal regulations.

 

  4. A Certificate of Destruction does not qualify as an acceptable format for product return.

 

  5. Product in which the lot number and/or expiration date is missing, illegible, covered, and/or unreadable on the original container.

 

  6. Product that Corcept determines, in its sole discretion, is otherwise adulterated, misbranded, or counterfeit.

To obtain authorization to return product, please call

Corcept Customer Service (855) 803-9482 with the following information:

 

•     Product Name

  

•     Contact Person

•     Quantity for each Product / NDC

  

•     Shipping Address

•     Lot Numbers (if available)

  

•     Reason for Return (e.g., concealed damage)

Customer Service will provide an RA number.

 

   

All returns must have the RA number clearly marked on the outside of the parcel.

 

   

Include shipping documentation with any returned goods, clearly indicating that the product is Corcept-owned.

 

   

No product will be accepted for return without an RA number.

Terms of Return Policy

 

  1. Transportation charges for Corcept-owned products will be paid by Corcept. No credit will be issued to the Vendor for administration, including third party processing fees.

 

  2. Corcept reserves the right to destroy, without recourse, all returned packages.

 

Page 15 of 17


Corcept’s “Returned Goods Policy – Corcept-Owned Product” is subject to change at any time and without prior notice to other parties.

Exhibit B (Return Goods Policy) may be modified with a written notification from Company to Distributor. Upon the effective date of the Return Goods Policy change, the Exhibit will be deemed amended to reflect such change.

 

Page 16 of 17


E XHIBIT C

C URA S CRIPT F ACILITY S ITES

 

Legal Entity Name

 

Address1

 

Address2

 

City

 

State

 

Zip Code

 

Direct Dial Phone

 

Direct Dial Fax

 

Weekday Hours

 

DEA #

CuraScript, Inc.

  5653 Stoneridge Drive   Suite 109   Pleasanton   CA   94588   (925) 251-0218   (925) 251-0296   M-Th 9:00 AM - 6:00 PM  

#########

CuraScript, Inc.

  10841 “Q” Street   Suite 102   Omaha   NE   68137   (402) 339-3933   (866) 379-3502   M-F 9:00 AM - 5:00 PM  

#########

CuraScript, Inc.

  6272 Lee Vista Blvd   Suite 100   Orlando   FL   32822   (407) 852-4903   (407) 852-4926   M-F 8:00 AM - 8:00 PM  

#########

CuraScript, Inc.

  3130 Rogerdale   Suite 160   Houston   TX   77042   (832) 251-2160   (832) 251-2851   M-F 9:00 AM - 5:30 PM  

#########

CuraScript, Inc.

  16 Mount Ebo Road South   Suite 21   Brewster   NY   10509       M-F 8:30 AM - 5:00 PM  

#########

CuraScript, Inc.

  2 Boulden Circle   Suite 1   New Castle   DE   19720   (302) 395-8950   (888) 773-7386   M-F 8:00 AM - 8:00 PM  

#########

CuraScript, Inc.

  2825 W. Perimeter Road   Suite 116   Indianapolis   IN   46241   (317) 484-4477     M-F 8:00 AM - 10:00 PM  

#########

Lynnfield Drug, Inc.

  4035 Tampa Road #6500     Oldsmar   FL   34677   (813) 854-1448   (813) 855-6972   M-F 9:00 AM - 5:00 PM  

#########

Lynnfield Compounding Center, Inc.

  12 Kent Way   Suite 120-E   Byfield   MA   01922   (978) 499-4600     M-F 8:00 AM - 9:00 PM  

#########

Lynnfield Drug, Inc.

  12 Kent Way   Suite 120-F   Byfield   MA   01922   (978) 499-4600     M-F 8:00 AM - 9:00 PM  

#########

 

Page 17 of 17

Exhibit 10.3

A MENDED AND R ESTATED E XCLUSIVE W HOLESALE P RODUCT P URCHASE A GREEMENT

T HIS A MENDED AND R ESTATED E XCLUSIVE W HOLESALE P RODUCT P URCHASE A GREEMENT (the “Agreement”) is made this 8th day of August, 2012, effective as of the 1st day of March, 2012 , (the “Effective Date”) by and between Priority Healthcare Distribution, Inc., doing business as CuraScript SD Specialty Distribution, a Florida corporation having offices at 255 Technology Park, Lake Mary, Florida, 32746 (“Distributor”), and Corcept Therapeutics Incorporated , a Delaware corporation having offices at 149 Commonwealth Drive, Menlo Park, CA 94025 (“Company”). The Parties hereto agree as follows:

W HEREAS , Company is a pharmaceutical manufacturer that wishes to contract with Distributor so that Distributor can distribute Company’s pharmaceutical product, Korlym™ (mifepristone) 300 mg Tablets;

W HEREAS , Distributor wholesales certain products to its customers, which include physicians and physician group practices, and certain health care institutions and facilities located in the United States and Puerto Rico; and

W HEREAS , the Parties desire to enter into this Agreement to appoint Distributor as the exclusive distributor that can distribute Company’s pharmaceutical products to Distributor’s customers.

N OW THEREFORE , in consideration of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, hereby agree as follows:

 

1. T ERM : Unless and until this Agreement is terminated as provided for herein, this Agreement shall have a term of 1 year, commencing on the Effective Date. Following the initial term of this Agreement Company may opt to extend exclusivity for additional 1 year terms. Any extension of this agreement must be mutually agreed to in writing.

 

2. P RODUCT : This Agreement governs Distributor’s distribution of those Company products set forth in Exhibit A (the “Products”), which is attached hereto and incorporated by reference herein and which may be modified from time to time by the Parties upon written mutual consent.

 

3. O RDERS : Distributor will supply purchase orders to Company on a mutually acceptable form, electronic data interface (EDI), via fax, email or phone.

 

4. P RODUCT P RICING :

 

  (a) Product Price : The Product price is listed in Exhibit A. Company reserves the right to change product pricing or update Product listing in Exhibit A upon written notice to Distributor. Company shall send the notifications regarding price changes to purchasingdistribution@curascript.com and contractadmin@curascript.com.

 

Page 1 of 14

 

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.


  (b) Resale Price : Distributor shall not sell Product for an amount [***]

 

  (c) Shelf Stock Adjustments : Company agrees to provide Distributor with a shelf stock adjustment for all Product inventories held by Distributor upon any decrease in price. The shelf stock adjustment shall be calculated by determining [***] Company shall pay Distributor any Shelf Stock Adjustment payable hereunder within [***] calendar days of the effective price decrease.

 

  (d) Price Increases : [***]

 

5. P AYMENT T ERMS : All of Company’s invoices for Product shall be due and payable by Distributor within [***] days after receipt by Distributor; provided, however , if Distributor pays such invoice within [***] days of Distributor’s receipt of such invoice, Distributor shall be entitled to [***], and Distributor shall be entitled to deduct such discount from the invoiced amount payable to Company. Payments will be made by check.

 

6. M ANAGED D ISTRIBUTION : Distributor shall sell Products only to persons or entities that are part of a Class of Trade. For purposes of this Agreement, “Class of Trade” shall mean only clinics treating patients with Product, hospitals treating patients with Product, and Company-approved specialty pharmacies Company may revise “Class of Trade”, in its sole discretion, upon providing Distributor with 10 days written notice.

 

7. R ISK OF L OSS :

 

  (a) Risk of Loss : Purchase orders for the Product should be submitted as designated on Exhibit A. All deliveries of Products will be Free On Board, Distributor’s Designated Facility. For purposes of this paragraph, the term “Free On Board, Distributor’s Designated Facility” means that Company shall: (i) bear all costs associated with shipping Products to Distributor’s designated facility; (ii) bear the risk of loss until a Distributor’s designated facility takes possession of the Product, which Product must be in new and acceptable condition upon receipt by Distributor; and (iii) be responsible for insuring Products while in transit. Distributor shall be entitled to designate more than one of its facilities for receipt of the Product.

 

Page 2 of 14

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


  (b) Inspection of Product : Distributor shall examine the Product upon delivery at Distributor’s facility and shall notify Company of any non-delivery of a portion of the shipment or any defect in any of the Product that is reasonably discoverable upon visual inspection of the Product. Within ten (10) business days after Distributor’s receipt of the Product, Distributor shall furnish to Company a description of the nature of any reasonably discoverable defect or shortage. Upon receipt of notice of any defect or shortage, Company shall promptly replace any defective or shorted Product or issue Distributor a full credit for such defective or shorted Product, as appropriate under the circumstances. In the absence of a written notice from Distributor to Company in accordance with the terms of this Section, a shipment of the Product shall be deemed to have been delivered and accepted by Distributor as complete and in satisfactory condition as to defects reasonably discoverable upon visual inspection. Distributor shall, at Company’s expense, follow Company’s instructions to permit Company’s inspection of the defective Product or to facilitate the return to Company (or Company’s third-party disposal company) any of the defective Product delivered to Distributor.

 

8. P RODUCT R ETURNS : All Products returned shall be made in accordance with Company’s standard returns policy in effect, which is attached hereto as Exhibit B and incorporated by reference herein. Distributor will be entitled to a credit from Company in the amount of the purchase price paid by Distributor for the Product for all Product returned in accordance with Company’s Returned Goods Policy. Notwithstanding anything herein to the contrary, all product returns made in conjunction with this agreement will be made on behalf of Distributor by Distributor’s designated third party product returns company (“Third Party”). Company will pay any reimbursement associated with product returns directly to Distributor and not to the designated Third Party. In addition, all fees associated with the use of the Third Party’s services will be paid by Distributor and not Company.

 

9. S USPENSION OF D ISTRIBUTION AND R ECALL :

 

  (a) If requested by Company for good reason, and upon written notification by Company to suspend distribution of Product, Distributor shall use commercially reasonable efforts to suspend its distribution of Product. If the suspension continues for more than [***], Company will repurchase the Product held in inventory by Distributor at the price paid for such Product by Distributor, and Distributor shall have the right to terminate this Agreement for material breach under the “Termination” Section of this Agreement, excluding the sixty (60) day notice period. All repurchased Product shall be returned to Company at Company’s expense.

 

Page 3 of 14

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


  (b) Company shall promptly notify Distributor of any recalls initiated by Company or required by the United States Food and Drug Administration. Upon receipt of notice of a recall from Company, Company shall provide Distributor a third-party (e.g., UPS or FedEx) billing number for shipping of recalled products to Company (or company’s designated agent) at Company’s expense. Distributor shall provide to Company the names and addresses of customers that may have received recalled products. Company shall be responsible for any reasonable mailing, shipping and administrative expenses incurred by Distributor in connection with the recall, plus a reasonable service fee of [***] per customer name and address, up to a maximum of [***] per recall as mutually agreed upon in advance by the parties, as well as the cost of replacement Product for Distributor’s customers provided that the reason for the recall does not arise from (i) the negligence or intentional misconduct of Distributor or any of its agents or employees; or (ii) failure of the Distributor to comply with the terms of this Agreement. In addition, Company shall pay the cost of replacement Product for Distributor’s customers.

 

  (c) Distributor shall maintain for [***] after termination or expiration of this Agreement such information as reasonably required in the event of a Product recall after termination or expiration of this Agreement, and shall make such information available to Company, at Company’s expense, in the event of such a recall.

 

  (d) Distributor shall use its commercially reasonable efforts to cooperate with Company in investigating any Product failure that resulted in the need for a recall and any reasonable costs involved with such investigation will be incurred by the Company.

 

10. E XCLUSIVITY : Distributor is appointed as the exclusive distributor for the Product. Nothing herein shall be construed to limit Distributor from entering into agreements with other manufacturers or wholesalers that allow Distributor to distribute products that compete with Company’s Products.

 

11. P RODUCT P ROMOTION : Distributor will not promote Company’s Products, but Distributor will promote its own distribution services to its customers in accordance with Distributor’s standard business practices, which typically include (but are not limited to) informing Distributor’s customers of pricing available for products distributed by Distributor. Accordingly, Distributor shall not distribute or generate any promotional material containing claims relating to the Product. Distributor may, however, provide its customers with educational information concerning the Product. Company represents and warrants that any materials relating to the Product that it provides to Distributor: (i) are limited to communications that are intended to describe the Product or provide important Product-related information; (ii) if required under applicable law, have received the appropriate regulatory approval(s) prior to use (e.g., FDA approval); and (iii) do not involve the counseling or promotion of any off-label use.

 

Page 4 of 14

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


12. E VIDENCE OF P EDIGREE : In accordance with and to the extent required by state and/or federal law, Distributor shall create and maintain all records, manifests, or other documentation, in electronic and/or written form, necessary to evidence the pedigree (i.e., a record of each distribution) of any Product purchased from Company and shipped, resold, or provided to another distributor or customer.

 

13. D IVERSION : Distributor shall promptly notify Company upon learning of any activity that appears to illegally divert any Products.

 

14. S ALES O UTSIDE THE U NITED S TATES : Distributor agrees not to distribute or sell Products outside of the United States, its territories or possessions, unless otherwise agreed to between the Parties in a written amendment to this Agreement.

 

15. T ERMINATION : This Agreement is made in good faith based on the assumption that early termination shall not be required. Notwithstanding the foregoing, early termination shall be permissible as follows:

 

  (a) By either Party with sixty (60) days written notice for any reason or for material breach by either Party.

 

  (b) Immediately upon notification or at any time thereafter, either Party may terminate this Agreement in the event that:

 

  (i) the other Party shall file any petition under any bankruptcy, reorganization, insolvency or moratorium laws, or any other law or laws for the relief of or in relation to the relief of debtors;

 

  (ii) there shall be filed against the other Party any involuntary petition under any bankruptcy statute or a receiver or trustee shall be appointed to take possession of all or a substantial part of the assets of the party which has not been dismissed or terminated within sixty (60) days of the date of such filing or appointment;

 

  (iii) the other Party shall make a general assignment for the benefit of creditors or shall become unable or admit in writing its inability to meet its obligations as they mature;

 

  (iv) the other party shall institute any proceedings for liquidation or the winding up of its business other than for purposes of reorganization, consolidation or merger; or

 

  (v) [***]

 

  (c) Immediately upon notification or at any time thereafter, by either Party if the terms of this Agreement are determined by either Party in good faith to be inconsistent with any applicable law.

 

Page 5 of 14

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


16. F EDERAL P ROGRAMS : Company and Distributor represent, warrant, and certify that neither it nor its principals was or is debarred, suspended, proposed for debarment, or otherwise determined to be ineligible to participate in Federal health care programs (as that term is defined in 42 U.S.C. 1320a-7b(f)), convicted of a criminal offense related to the provision of health care items or services, or currently the subject of any Office of Inspector General investigation (collectively, an “adverse enforcement action”). The parties shall notify immediately if it becomes the subject of an adverse enforcement action.

 

17. A DVERSE E VENT R EPORTING : Distributor shall not be responsible for FDA reporting of adverse events. Distributor shall notify Company within two (2) business days of any Product adverse event complaint from a third party being reported to Distributor by faxing the information to the Corcept Medical Hotline at 303-389-1771.

 

18. S TATUTORY AND R EGULATORY C OMPLIANCE : Distributor and Company shall comply with all applicable federal, state, and local laws and regulations governing their activities related to this Agreement, including without limitation, laws related to fraud and abuse, false claims, provision of samples, and prohibition on kickbacks. Without limiting the generality of the foregoing, the Parties further agree as follows:

 

  (a) Discounts. Although Distributor does not submit claims or requests for payment to Medicare or Medicaid, the Parties have endeavored to structure the prompt pay discount arrangement and Discounted Product Price set forth herein (collectively, the “discounts”) as discounts otherwise consistent with the applicable characteristics of the statutory discount exception (42 U.S.C. § 1320a-7b(b)(3)(A)) and the discount safe harbor (42 C.F.R. § 1001.952(h)). The applicable fixed percentages pursuant to which the discounts will be paid have been set in advance, as set forth herein. The discounts set forth in this Agreement are not dependent on, and do not operate in conjunction with, (either explicitly or implicitly) any other arrangement or agreement between Company and Distributor. Company represents and warrants that: (i) it will refrain from doing anything that would impede Distributor from meeting any reporting obligations Distributor may have under applicable law; (ii) it will comply with all reporting requirements for pharmaceutical manufacturers under all Federal health care programs and, in particular, will include any and all discounts paid hereunder in its calculations of “average manufacturer price” (“AMP”) or “best price” under the Medicaid drug rebate program, and in the calculations of “average sales price” (“ASP”) under Medicare, to the extent applicable; (iii) it will properly report the existence of the discounts on the invoices or statements submitted by Company to Distributor; and (iv) no discount paid pursuant to this Agreement is intended in any way as a discount related to a drug formulary or drug formulary activities and has not been negotiated or discussed between the Parties in connection with any such drug formulary or formulary activities. To the extent required under applicable law, Distributor will report the discounts to appropriate Federal health care programs, and, in any event, will promptly disclose such discounts if requested by a governmental agency.

 

Page 6 of 14


  (b) Pedigree Laws Compliance . By executing this Agreement, Company hereby designates Distributor, and Distributor accepts such designation, as an authorized distributor of record for purposes of the parties’ compliance with the Prescription Drug Marketing Act of 1987, as amended by the Prescription Drug Amendments of 1992, and as may be further amended from time to time, and any and all applicable state pedigree laws having the same or similar designation as an authorized distributor of record.

 

  (c) Regulatory Approvals . Company represents and warrants that it has received all applicable regulatory and/or statutory approvals in order for it to lawfully distribute the Product(s) to Distributor hereunder.

 

  (d) FDA Compliance. Company hereby represents that at the time of commercial sale of the Product Company will have received clearance from FDA to market the Product in the United States. In the event FDA or any other governmental entity withdraws its marketing clearance for the Product, Company shall promptly notify Distributor. Furthermore, Company represents and warrants that, at the time of shipment or delivery from Company, the Products (a) shall not be adulterated, misbranded, or otherwise prohibited within the meaning of the Federal Food, Drug and Cosmetic Act, 21 U.S.C.A. 301 et. Seq., as amended, and in effect at the time of shipment or delivery (the “Act”) or within the meaning of any applicable state or municipal law in which the definition of adulteration or misbranding are substantially the same as those contained in the Act; and (b) shall not be merchandise which may not be introduced or delivered for introduction into interstate commerce under the provisions of sections 301, 404 or 505 of the Act (21 U.S.C.A. 331, 344 and 355).

 

19. C ONFIDENTIALITY : Each Party shall take all reasonable actions and do all things reasonably necessary to ensure that any information contained in this Agreement, as well as any information relating to this Agreement or is acquired by virtue of this Agreement (in either case, “Confidential Information”) shall not be disclosed or used for purposes outside this Agreement; provided, however, that the foregoing shall not apply to information that: (i) is provided to the disclosing Party’s attorney or accountant; (ii) is requested by a legal or regulatory authority; (iii) is provided by the disclosing Party to its Affiliate (provided such Affiliate is subject to the confidentiality restrictions herein), and for the purpose of this section “Affiliate” shall mean an entity in which the disclosing Party maintains an ownership position; (iv) a Party can show it knew prior to disclosure without obligation of confidentiality; (v) is or becomes public knowledge through no fault of said Party; (vi) is lawfully disclosed by a third Party under no obligation of confidentiality; or (vii) is required to be disclosed pursuant to court order or by law. This Section shall survive any termination of this Agreement for a period of five (5) years thereafter. Each Party shall either return to the disclosing Party, or destroy, all Confidential Information received hereunder upon the expiration or termination of this Agreement, except that either Party may retain one (1) copy of such Confidential Information in order to satisfy any future legal obligations it may have. Notwithstanding anything to the contrary herein, Distributor shall not be entitled to sell its purchasing data (which may include data relating to the Product) to third parties (e.g., IMS or NDC).

 

Page 7 of 14


20. M UTUAL I NDEMNIFICATION :

 

  (a) Distributor will indemnify and hold Company harmless from and against any loss, cost, damage, expense, or other liability, including, without limitation, reasonable costs and attorney fees (“Costs”) incurred in connection with any and all third Party claims, suits, investigations or enforcement actions (“Claims”) as a result of Distributor’s negligent acts, negligent omissions, or willful misconduct, or Distributor’s breach of this Agreement.

 

  (b) Company will indemnify and hold Distributor harmless from and against any Costs for Claims incurred by Distributor as a result of Company’s manufacturing of the Products, negligent acts, negligent omissions, willful misconduct, or Company’s breach of this Agreement. In addition, Company shall indemnify Distributor for the Costs for Claims incurred by Distributor in connection with: (i) any commercial products liability action; and (ii) any recall, quarantine, warning, or withdrawal of any Company product,

 

  (c) As a condition of indemnification, the Party seeking indemnification shall notify, to the extent possible under applicable law, the indemnifying Party in writing promptly upon learning of any Claim for which indemnification may be sought hereunder. The indemnifying Party shall have a right to participate in the defense of such Claim, and the Parties will cooperate in such defense. No Party shall have an obligation to indemnify the other Party as described herein with respect to any claim settled without the mutual written consent of both Parties, which consent shall not be unreasonably withheld.

 

21. L IMITATION OF L IABILITY : In no event shall either party be liable to the other under this Agreement for any special, incidental, indirect, exemplary, or consequential damages, whether based on breach of contract, warranty, tort (including negligence), lost profits or savings, punitive damages, injury to reputation, loss of customers or business, product liability, or otherwise, and whether or not such party has been advised of the possibility of such damage. The parties acknowledge and agree that the foregoing limitations of liability are a condition and material consideration for their entry into this Agreement.

 

Page 8 of 14


22. I NSURANCE : Distributor and Company shall maintain such policies of general liability, professional liability, and other insurance of the types and in amounts customarily carried by their respective businesses. Notwithstanding the foregoing, Company shall, at a minimum, maintain throughout the term of this Agreement commercial products liability coverage, either through commercial insurance or a self insured retention pool, in an amount no less than [***]. Each Party shall provide the other with reasonable proof of insurance upon written request.

 

23. N OTICE : Any notice, demand, request, consent, or approval required or permitted hereunder shall be in writing and shall be delivered: (i) personally; (ii) by certified mail, return receipt requested, postage prepaid; (iii) by facsimile transmission; or (iv) by overnight courier by a nationally recognized courier service, to the address indicated below or to such other address as may be designated in writing by each Party from time to time.

If to Company:

Corcept Therapeutics Incorporated

ATTN: Commercial Operations

149 Commonwealth Drive

Menlo Park, CA 94025

If to Distributor:

Express Scripts, Inc.

One Express Way

St. Louis, MO 63121

Attn: Legal Department

With a copy to:

Priority Healthcare Distribution, Inc.

255 Technology Park Drive

Lake Mary, FL 32746

All such communications shall be deemed to have been received by the intended recipient: (i) five (5) business days following deposit in the United States Mail if sent by certified mail; (ii) on the day actually received if delivered personally; (iii) upon confirmation of receipt of a facsimile transmission if sent by facsimile; or (iv) on the next business day if sent by overnight carrier.

 

Page 9 of 14

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


24. S EVERABILITY : In the event any portion of this Agreement not material to the remaining portions hereof shall be held illegal, void or ineffective, such portion(s) shall be deemed stricken and the remaining portions hereof shall remain in full force and effect. Subject to the consent of both Parties, such consent not to be unreasonably withheld, if any of the terms or provisions of this Agreement are in conflict with any applicable statute or rule of law, then such terms or provisions shall be deemed inoperative to the extent that they may conflict therewith and shall be deemed to be modified to conform with such statute or rule of law.

 

25. A UDIT : Each Party shall have the right to conduct an audit of the other Party’s books and records for the sole purpose of determining the other party’s compliance with this Agreement, on thirty (30) days advance written notice to determine whether the other Party has complied with the terms and provisions of this Agreement. Each Party shall pay its respective expenses associated with the audit. Nothing herein shall be construed to permit either party to duplicate, copy, or otherwise reproduce any information audited pursuant to this Section. Furthermore, The audit shall be conducted at the audited Party’s place of business during such Party’s normal business hours, provided that the auditors agree to be bound by confidentiality restrictions no less restrictive than those set forth in the “Confidentiality” Section above. If an independent third party is used to conduct the audit, Distributor requires such third party to execute a confidentiality agreement with Distributor prior to any such audit.

 

26. E NTIRE A GREEMENT : With regard to the issues addressed herein, this Agreement and the Exhibits hereto contain the entire agreement and understanding of the Parties, and supersedes any and all prior agreements and understandings regarding the same subject matter. No amendment, modification, revision, representation, warranty, promise or waiver of or to this Agreement shall be effective unless the same shall be in writing and signed by both Parties

 

27. C OUNTERPARTS : This Agreement may be executed in any number of counterparts, all of which together shall constitute one and the same instrument.

 

28. A SSIGNMENT : Neither Party may assign this Agreement without the written consent of the other, provided however, that Distributor may assign this Agreement to any affiliate that is wholly owned by its corporate parent, or to Distributor’s corporate parent. Furthermore, nothing herein shall be construed to limit Distributor’s right to delegate certain administrative functions as set forth herein.

 

29. D ELEGATION OF R ESPONSIBILITIES : Distributor may engage a third party to conduct certain administrative functions on its behalf, including, but not limited to, data compilation and reporting services, financial accounting and processing services, or any other function relating to any of Distributor’s obligations set forth herein. Company agrees to cooperate with Distributor’s reasonable requests relating to Distributor’s engagement of any such third party and such third party will be bound by confidentiality restrictions no less restrictive than are set forth above in the Confidentiality Paragraph set forth above in this Agreement.

 

Page 10 of 14


30. F ORCE M AJEURE : Notwithstanding anything to the contrary herein, neither Party shall be liable in any manner for any delay to perform its obligations hereunder which are beyond a Party’s reasonable control, including, without limitation, any delay or failure due to strikes, labor disputes, riots, earthquakes, storms, hurricanes, floods or other extreme weather conditions, fires, explosions, acts of God, embargoes, war or other outbreak of hostilities, government acts or regulations, or the failure or inability of carriers, suppliers, delivery services, or telecommunications providers to provide services necessary to enable a Party to perform its obligations hereunder. In any such circumstance, the Party unable to perform its obligations shall notify the other Party of such circumstance, and said other Party shall have the right to terminate this Agreement immediately upon provision of written notice if the Party of the first part continues to be unable to perform its obligations hereunder for a period of thirty (30) days.

 

31. W AIVER : No waiver of any term of this Agreement shall be valid unless waived in writing and signed by the Party against whom the waiver is sought. The failure of either Party to require performance by the other Party of any provision hereof shall not affect in anyway the right to require such performance at any time thereafter.

 

32. I NDEPENDENT C ONTRACTORS : Nothing in this Agreement is intended to create any relationship between Distributor and Company other than as independent contractors and neither Party, nor any of their employees, staff, agents, officers or directors shall be construed to be the agent, fiduciary, employee, or representative of the other.

 

33. C HOICE OF L AW : This Agreement and performance of the obligations hereunder, shall be governed by, and construed in accordance with, the laws of the State Delaware, without regard to the conflicts of laws provision therein.

 

34. C OMPLIANCE WITH L AWS : Each Party certifies that it shall comply with all applicable federal and state laws, rules, regulations, determinations of governmental tribunals, and all governmental interpretations of such laws, rules, regulations, and determinations, with respect to the performance of its obligations under this Agreement.

 

35. E XHIBITS AND S CHEDULES : In the event of any conflict or inconsistency between the provisions of this Agreement and any exhibits or schedules hereto, the provisions of the body of this Agreement shall control.

 

36. T HIRD P ARTY B ENEFICIARIES : This Agreement is not a third Party beneficiary contract, and, therefore, there are no third Party beneficiaries to this Agreement.

 

Page 11 of 14


37. C ORPORATE D ISCLOSURE S TATEMENT : Distributor is a wholly-owned direct subsidiary of Priority Healthcare Corporation (“PHC”), which is a diversified health care company that among other things owns or operates specialty and infusion pharmacies, wholesale distribution facilities, and a group purchasing organization. PHC is wholly-owned by CuraScript, Inc. (“CuraScript”), which is a diversified healthcare company principally focused on specialty pharmacy, biotech distribution, and related services. CuraScript is wholly-owned by Express Scripts, Inc. (“Express Scripts”), which is a publicly traded diversified health care company that, in addition to owning CuraScript, owns or operates several other businesses, including (but not limited to) one of the nation’s largest pharmacy benefit managers and several mail service pharmacies. More information on Express Scripts can be found in its public filings with the Securities and Exchange Commission. Each of the Express Scripts, CuraScript, and PHC businesses already may have (or may develop in the future) relationships with vendors, including vendors that contract with Distributor to provide goods and services to Distributor’s customers. These relationships may involve discounted purchasing relationships, rebate-type arrangements, and payments for services. If Company desires additional information regarding any of the information that already has been provided in this Corporate Disclosure Statement, Distributor will provide Company with such additional information upon request.

 

Page 12 of 14


I N WITNESS WHEREOF , the undersigned, duly authorized, has executed this Agreement, effective as of the date set forth herein.

 

P RIORITY H EALTHCARE D ISTRIBUTION , I NC .     C ORCEPT THERAPEUTICS I NCORPORATED
By:  

/s/ Gayle Johnston

    By:  

/s/ Joseph K. Belanoff

Print:   Gayle Johnston     Print:   Joseph K. Belanoff
Name:   Gayle Johnston     Name:   Joseph K. Belanoff
Title:   President     Title:   CEO

 

 

Page 13 of 14


E XHIBIT A

P RODUCT P RICING

 

P RODUCT

   NDC      S TRENGTH      S IZE    P RODUCT
P RICE
    D ISCOUNTED
P RODUCT
P RICE *
 

Korlym™ (mifepristone) 300 mg Tablets

     76346-073-01         300 mg       Bottle of 28      [ ***]      [ ***] 

Korlym™ (mifepristone) 300 mg Tablets

     76346-073-02         300 mg       Bottle of 280      [ ***]      [ ***] 

[***]

All purchase orders should be submitted to:

Corcept/ICS Customer Contact Number. (855) 803-9482

Toll free fax number for Corcept. (855) 803-9483

Customer Service e-mail: Corcept@icsconnect.com

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


E XHIBIT B

R ETUNED G OODS P OLICY

Corcept Therapeutics Incorporated

RETURNED GOODS POLICY

Before returning any product to Corcept Therapeutics Incorporated (“Corcept”), customers must first call Corcept Customer Service 855-803-9482 and obtain a Return Authorization (“RA”) number.

All products returned to Corcept without an RA number will be refused

Products Eligible for Return

 

  1. Received by customer as damaged – Products received damaged may be returned for full credit, including freight, when reported within [***] days of receipt. If product is received damaged, please have the transportation company note “damaged” or “broken” on the freight bill. Claims with UPS or Registered Postal Service should remain in the original carton for inspection.

 

  2. Received by customer in error or shortages – Product shipped in error by Corcept may be returned within [***] days of invoice date.

 

  3. Ordered by the customer in error – Products ordered in error may be returned when reported within [***] days of receipt.

 

  4. Expired product – Expired product must be received within twelve (12) months after expiration for credit to be issued. Expired product approved by Corcept for return must be shipped freight prepaid within [***] days of authorization date.

 

  5. Corcept will issue authorization for the return of eligible, unopened product only (no partial containers except in GA, MS, and NC and where mandated by state statute).

 

  6. Product must be in its original container bearing its original label.

Products Not Eligible for Return

 

  1. Product involved in fire, sacrifice or bankruptcy sale; or items that have been damaged due to conditions beyond the control of the manufacturer, such as improper storage, heat, cold, water, smoke, fire, or negligence.

 

  2. Product not properly stored as outlined by the Prescription Drug Marketing Act.

 

  3. Product that has been discontinued by Corcept for more than 12 months.

 

  4. Product that has been opened or partial containers (except where mandated by state statute).

 

  5. Product that has been obtained via free goods.

 

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


  6.

Product returned by other than the purchaser (except by 3 rd Party Processor agent).

 

  7. Product purchased directly from a drug wholesaler should be returned to the wholesaler for credit.

 

  8. Product sold with the specific understanding that it is non-returnable.

 

  9. Product originally sold through other than normal domestic channels of distribution or purchased from a source other than an approved distribution center of Corcept.

 

  10. Product that has been repackaged or is in other than Corcept containers/packages.

 

  11. Product more than 12 months past the expiration date.

 

  12. Product that is obtained in violation of state or federal regulations.

 

  13. A Certificate of Destruction does not qualify as an acceptable format for product return.

 

  14. Product in which the lot number and/or expiration date is missing, illegible, covered, and/or unreadable on the original container.

 

  15. Product that Corcept determines, in its sole discretion, is otherwise adulterated, misbranded, or counterfeit.

To obtain authorization to return product for credit, please call

Corcept Customer Service (855) 803-9482 with the following information:

 

•     Product Name

  

•     Billing Address

•     Quantity for each Product

  

•     Shipping Address

•     Lot Numbers (if available)

  

•     Reason for Return (e.g., concealed damage)

•     Unit Price

  

•     Contact Person

•     Debit Memo Number

  

Customer Service will provide an RA number for those items approved for credit. All returns must have the RA number clearly marked on the outside of the parcel. Include shipping and debit memo documentation with any returned goods. Corcept recommends that all customers insure return goods shipments. No product will be accepted for return without an RA number.


Terms of Return Policy

 

  1. Credit for returned goods is issued at the highest price for the lot number, or at applicable contract price less third party handling charge, whichever is lower.

 

  2. Transportation charges are to be prepaid by customer. No credit will be issued for administration, shipping or handling, including third party processing fees.

 

  3. Exclusive of ordering/shipping errors, merchandise returned within 120 days of purchase is subject to a restocking fee of up to 10%, excluding during the announced time period of new product launches.

 

  4. Deductions from payables may not be taken until a credit memo is issued.

 

  5. Unauthorized deductions for returns may result in held orders.

 

  6. For items purchased from a wholesaler, credit will be issued through the wholesaler.

 

  7. Returns should be channeled through the original source of purchase. The original source of purchase is defined as the entity that was directly invoiced by Corcept and the distributor of origin.

 

  8. Returns are subject to final count and acceptance by Corcept. Reimbursement for partial bottles of tablets, for those states where mandated, will be based on individual tablet count. Corcept reserves the right to accept or reject any merchandise for credit.

 

  9. Corcept reserves the right to destroy, without recourse, all returned packages.

 

  10. Unauthorized returns may be destroyed and not reimbursed.

 

  11. Corcept reserves the right to inspect all authorized returns prior to issuing credit and to destroy products deemed unfit for sale whether or not they are eligible for credit.

Corcept’s returned goods policy is subject to change at any time and without prior notice to other parties.

Exhibit B (Return Goods Policy) may be modified with a written notification from Company to Distributor. Upon the effective date of the Return Goods Policy change, the Exhibit will be deemed amended to reflect such change.

Exhibit 31.1

CERTIFICATION

I, Joseph K. Belanoff, M.D., certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2012 of Corcept Therapeutics Incorporated;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

/s/ Joseph K. Belanoff
Joseph K. Belanoff, M.D.
Chief Executive Officer
August 9, 2012

Exhibit 31.2

CERTIFICATION

I, G. Charles Robb, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2012 of Corcept Therapeutics Incorporated;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

/s/ G. Charles Robb

G. Charles Robb
Chief Financial Officer
August 9, 2012

Exhibit 32.1

Corcept Therapeutics Incorporated

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Corcept Therapeutics Incorporated (the “Company”) on Form 10-Q for the quarter ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph K. Belanoff, M.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Joseph K. Belanoff
Joseph K. Belanoff, M.D.
Chief Executive Officer
August 9, 2012

Exhibit 32.2

Corcept Therapeutics Incorporated

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Corcept Therapeutics Incorporated (the “Company”) on Form 10-Q for the quarter ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, G. Charles Robb, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ G. Charles Robb

G. Charles Robb
Chief Financial Officer
August 9, 2012